Mighty DIIs or reluctant FIIs? 

There is a case being made out to assume that the strength in equity markets this year so far is thanks to the retail investors who have believed in the India story more than the foreign institutional investors and has pumped in money systematically via mutual funds. While there is merit to this narrative, is this the whole picture? 

Domestic institutional investors (DIIs) increased their stake in NSE-listed companies by 44 basis points, reaching a record 18.26% — the highest level since Prime Database began tracking in 2009. Meanwhile, overseas investors saw their share slip by 34 bps to 16.71%, the lowest in over 13 years. 

By contrast, foreign institutional investor (FII) ownership — measured as equity assets under custody (AUC) relative to the total market capitalisation of BSE-listed firms — had climbed to a six-month peak in September 2024. Notably, that same month marked the onset of a prolonged downturn in Indian equities. 

Mutual fund assets under management (AUM) relative to bank deposits have tripled over the past decade, rising from 12.6% in 2015 to 33.4% in 2025, according to Franklin Templeton India Mutual Fund. At present, mutual fund AUM is roughly onethirdone-third the size of bank deposits — about ₹Rs. 80 lakh crore versus ₹Rs. 240 lakh crore. 

Yet again, it is difficult to say that the divergence is owing to lack of belief of FIIs in the India story. On the other hand, the narrative that Indian markets are self-reliant, thanks to DII buying also merits a closer analysis. Let us look at both sides of the coin.  

The table above suggests that, while FIIs have been persistently net sellers in the secondary market, they have been pumping money into the primary market. The net investment into the primary market in October and November so far, lags only behind July figures. In other words, FIIs’ reluctance in secondary market is not very much a reflection of lack of belief in the India story, butstory but could be more of a statement on valuation and a preference towards new businesses. 

Provisional NSE data indicates that mutual funds, insurers, banks, and other domestic institutions have collectively purchased equities worth ₹Rs. 5.1 lakh crore so far this fiscal year — exceeding the previous record of ₹Rs. 3.8 lakh crore during the same period in 2024. This surge is particularly significant against the backdrop of persistent foreign institutional investor (FII) outflows from Indian markets this year. 

That statistics do not reveal the full picture is evident from that fact that even though the average gross purchases of FIIs during the first eight months of the FY2024 was higher than that of FY 2025 for the same period, Nifty gained only 7.45% when compared to 11.74 in FY 2025, while DII clocked similar numbers for two fiscals. Interestingly, among the last three fiscals, 2023 saw the highest rise in Nifty, at 18.5%, even though DII’s net investment was just about half of what was witnessed in the other two fiscals. 

In summary, while it is fair to continue assuming that FIIs continue to hold sway over Indian markets, even though DIIs’ role has significantly improved over the years, the mere comparison of net investment figures of the large institutions does not portray the full picture. This is because, while valuation is one of the crucial decision points, stock or sector allocation or the timing of entry and exit may vary vastly between DIIs and FIIs depending on geo political issues, rate cuts, currency volatility, etc. which impact these institutions differently. 

Source: FII assets in India cross a trillion dollars; equity ownership at six month high; Desi Money Dominates: DII holdings hit record as foreign ownership sinks to 13-year low – The Economic Times; Record Rs 7 lakh crore DII buying so far in 2025 in Indian markets and counting.