Mumbai: Domestic institutional investors (DIIs) have invested over ₹5 lakh crore in Indian equities year to date, underscoring their growing role in stabilizing markets amidst foreign outflows. Provisional data from the NSE shows that mutual funds, banks, insurers, and other domestic institutions have net purchased ₹5.13 lakh crore in equities so far in 2025, following a record ₹5.25 lakh crore in 2024. Domestic purchases have risen as foreign institutional investors (FIIs) have entered a continuous selling phase, withdrawing over ₹1.6 lakh crore from the secondary market this year, after withdrawing nearly ₹1.21 lakh crore in 2024, according to NSDL data.
Despite recent volatility on Dalal Street, the counter-buying by DIIs in reaction to substantial selling by FPIs is more significant than in previous instances, including the 2008 Global Financial Crisis and the 2022 sell-off, as noted in a report from ICICI Securities. DII inflows have helped mitigate selling pressure from FIIs, major promoter offloads, and profit-taking by private equity funds. However, strong domestic inflows have not translated into broad market gains, with indices across all market capitalizations showing flat to negative performance over the past 12 months. Following a tumultuous year in 2025, the Sensex rose 1.96 percent year-to-date, while the Nifty increased by 3.28 percent.
In contrast, the BSE MidCap index fell over 3.8 percent, and the BSE smallcap index declined over 6.7 percent. Analysts noted that India’s Q1 GDP growth of 7.8 percent exceeded expectations. Both the fiscal stimulus from the budget and the monetary stimulus from the MPC are expected to have lagging effects. Proposed GST reforms could further enhance growth in the coming quarters, they added. This, combined with significant liquidity flowing into mutual funds, is expected to continue supporting the market. DII inflows for 2025 reached 2.2 percent of the average Nifty market capitalization, the highest level since 2007.