Domestic institutional investors (DIIs) have made record investments in Indian equities in 2025, infusing over ₹6 trillion — the highest ever in a calendar year since the BSE began maintaining such data in 2007. The strong inflow highlights the growing dominance of domestic money in India’s capital markets, even as foreign investors turned net sellers.
According to BSE data, DII investments in 2025 surpassed the previous year’s inflow of ₹5.26 trillion, marking another year of sustained domestic buying momentum. DIIs include banks, insurance firms, mutual funds, pension funds, and domestic financial institutions (DFIs).
Resilient Domestic Flows Offset Foreign Selling
The robust DII inflows have offset selling pressure from foreign portfolio investors (FPIs), who withdrew nearly $23.3 billion (₹2.03 trillion) from Indian equities in 2025, according to data from NSDL. However, FPIs did invest ₹49,590 crore through primary markets and other channels during the year.
Experts say this divergence underscores a structural shift in India’s capital markets, where domestic investors now play a stabilising role.
Rishi Kohli, CIO of Jio BlackRock AMC, said SIP flows have remained resilient even during market corrections. “Unless there’s a global shock causing a 30–40% correction, DIIs should continue investing strongly. I won’t be surprised if DII flows surpass 2025 levels in 2026,” he noted.
Global Investors Shun India Amid Tariff Impact
Mahesh Patil, CIO of Aditya Birla Sun Life AMC, observed that FIIs have been overweight on markets such as the US, China, Germany, and Brazil, while pulling funds from India, Japan, Vietnam, and South Korea.
The US tariffs on Indian goods — 25% imposed on August 7 and another 25% on August 27 — also weighed on foreign sentiment during the year.
Despite these headwinds, Indian markets have remained remarkably resilient. As of mid-October 2025, the BSE Sensex has gained 5.8%, and the Nifty50 is up 4.4%. In contrast, the BSE Smallcap and Midcap indices are down 5.6% and 1.6%, respectively.
DIIs Dominate Key Sectors
Data indicates that DIIs increased allocations to banking, capital goods, healthcare, and automobile sectors during 2025 — all areas expected to benefit from India’s domestic demand recovery.
According to G. Chokkalingam, founder of Equinomics Research, DIIs have consistently profited by buying aggressively during market downturns, particularly when FIIs sell heavily. “Since 2008, this cycle has repeated successfully. Panic selling by FIIs has often turned into a buying opportunity for DIIs,” he said.
He added that while insurance and pension inflows will continue to support DII investments, the pace of buying may moderate as markets hover near record highs.
Domestic Money Emerging as Market Backbone
Sonam Udasi, Senior Fund Manager at Tata Asset Management, believes domestic investors—particularly through mutual funds and SIPs—will continue to dominate Indian equities.
“Monthly inflows exceeding ₹25,000 crore demonstrate the deepening of the local investor base. If tariff pressures ease, foreign investors might eventually catch up,” he said.
Summary:
DIIs have poured a record ₹6 trillion into Indian equities in 2025, offsetting heavy FPI outflows and ensuring market stability amid global headwinds and tariff pressures. The consistent inflows, powered by SIPs and long-term domestic savings, highlight a structural shift in India’s markets, where domestic capital increasingly drives resilience and growth. Experts expect the trend to continue into 2026, albeit at a slightly moderated pace.
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