Domestic institutional investors (DIIs) — led by mutual funds and insurance companies — are on track to hit record equity purchases this year, providing stability to India’s $5.1 trillion stock market even as foreign institutional investors (FIIs) continue to pull out.

So far in 2025, DIIs have bought over $59 billion worth of equities, inching close to last year’s all-time high. In contrast, FIIs have withdrawn $14 billion, redirecting funds to China’s rallying markets.

Retail investors step up

The resilience comes largely from retail investors, who have developed disciplined habits through systematic investment plans (SIPs). Monthly inflows into equity mutual funds have crossed $3 billion, showing households are steadily shifting away from traditional assets such as deposits, gold and real estate.

“This habit of investing in equity mutual funds is firmly entrenched,” noted Christopher Wood, global head of equity strategy at Jefferies. As a result, domestic institutions’ ownership of listed Indian companies hit a record 18% in March, surpassing foreign investors’ share, according to Prime Database.

Market under pressure

Despite strong domestic support, Indian equities have underperformed regional peers. The NSE Nifty 50 is up just 4% in 2025, compared to China’s 15% gain. Concerns over US tariffs — with Washington imposing a 50% duty on Indian exports — and already weak corporate earnings have weighed on sentiment.

“Retail investors have developed a disciplined investing habit through mutual funds, and steady inflows are likely to continue,” said Vikas Gupta, strategist at OmniScience Capital.

Outlook

Analysts believe persistent domestic flows will remain a key cushion against global volatility. “Indian investors are not disturbed by global developments; their faith in local shares remains steadfast,” Gupta added.

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