Monthly SIPs have crossed Rs 310 billion despite zero equity returns over two years and massive foreign selling.
The conventional wisdom about retail investor behaviour is that it is driven by returns — people invest when markets go up and pull money out when they fall. India’s SIP story is dismantling that assumption in real time. Over the last two years, the Nifty 50 has delivered a compound annual return of just 0.8% in rupee terms — and negative 3.2% in US dollar terms. Foreign institutional investors sold a net US$36 billion of Indian equities across FY25 and FY26.
And yet monthly SIP inflows have risen 48% to Rs 310 billion in May 2026, with cumulative equity and balanced fund net inflows reaching Rs 9.43 trillion. JP Morgan has just initiated coverage of India’s capital markets sector with this structural observation as its foundation — and its preferred picks are AngelOne, CAMS and ICICI AMC.
The SIP Story Is Structural, Not Cyclical
The central thesis of JP Morgan’s initiation is that SIPs have become the demand anchor of India’s financial markets in a way that is qualitatively different from anything seen before. SIPs contributed 77% of total equity and balanced fund net inflows in FY26 — a dominance that reflects the “set-and-forget” behaviour of a retail investor base that has been trained, through AMFI campaigns and distributor education, to stay invested through volatility rather than time the market.
The policy environment is reinforcing this. Equity is taxed at 12.5% long-term capital gains — still meaningfully lower than most alternative asset classes. The removal of indexation benefits from debt instruments, the taxation of insurance policy proceeds, and slab-rate taxation for debt mutual funds have all improved equity’s relative tax appeal. “Policy and tax are supportive,” JP Morgan notes — and these are not temporary concessions but structural changes that reshape the incentive framework for Indian household savings.
The threshold that JP Morgan uses to frame the bull case is simple: as long as monthly SIPs stay above Rs 300 billion, the structural story remains intact. The thesis is invalidated if SIPs fall below Rs 250 billion for a sustained period — a level that, at Rs 310 billion today, requires a meaningful reversal of current behaviour to reach.
The Exchange Volume Story
Beyond mutual funds, India’s exchange ecosystem has scaled dramatically. Industry average daily premium turnover has risen from Rs 10 billion in FY14 to Rs 699 billion in FY26 — a compounding driven by weekly expiry proliferation, increasing retail participation and algorithmic trading. In commodities, MCX saw futures average daily turnover reach Rs 642 billion in FY26, up 138% year-on-year, on the back of strong bullion and energy price movements.
JP Morgan sees limited risk to derivative volumes from potential restrictions on retail participation — a concern that has periodically surfaced in regulatory conversations. The structural drivers of volume growth — more participants, more products, more frequent expiries — are difficult to reverse through incremental regulation short of a fundamental overhaul of the derivatives framework.
Exchanges and depositories sit at the top — they enjoy the strongest pricing power, operating leverage and structural volume tailwinds. Low-cost retail brokers rank next, benefiting from scale in a competitive market. Asset managers come third — less cyclical because revenue is AUM-linked rather than volume-linked, but facing a ceiling on operating leverage from TER scale regulations. MF RTAs — the back-office operators of the mutual fund industry — sit at the bottom of the preference stack, with lower pricing power and operating leverage than any other sub-sector.
“We prefer Exchanges > Depositories > Brokers > Asset Managers > MF RTAs,” the report states plainly.
JP Morgan’s preferred order across covered stocks is: AngelOne > CAMS > ICICI AMC > NAM > HDFC AMC. BSE and KFINTECH are rated Neutral — good businesses but awaiting better entry points. CDSL and MCX are rated Underweight.
AngelOne leads the preference list as JP Morgan’s top pick in the broker space — a business that has built operating leverage at scale, benefits from SIP-led financialisation drawing new investors into markets, and has diversified into wealth management and AMC. The combination of volume sensitivity and structural market share gains makes it the highest-conviction idea in the sector.
CAMS — the MF registrar and transfer agent — earns second preference despite sitting lower in the business model hierarchy because of its near-monopoly positioning in fund administration, making it a toll-road on the SIP story without the cyclicality of volume-dependent businesses.
ICICI AMC takes third spot among the AMCs — a reflection of distribution strength, brand equity and the operating leverage available as AUM scales from an already large base. NAM and HDFC AMC follow, both high-quality franchises but with less incremental upside at current entry points.
Three scenarios matter. First — and most important — SIP inflows staying below Rs 250 billion for a sustained period. Second, adverse regulatory changes resulting in average daily premium turnover falling more than 20% — through entry restrictions or cancellation of weekly expiries. Third, premium turnover running more than 15% above assumptions on a sharp volatility spike, which would inflate near-term revenue but create a high base for subsequent comparisons.
The TER regulation impact is also flagged but explicitly moderated — JP Morgan expects the yield impact to be less than one basis point across the industry, a finding that is more benign than the market has periodically feared.
Of course, stocks have already priced in much of the structural story. Over the past year: BSE is up 50%, MCX up 78%, NAM up 56% — all against a Nifty that is down 3%. “Earnings durability will diverge meaningfully by business model,” the report notes — a signal that from here, stock selection within the sector matters more than sector allocation. The businesses with the most durable earnings — exchanges, depositories, and scale brokers — will be rewarded.