DII Surge Turns Tables in Indian Stock Market After 25 Years, FIIs Take a Backseat

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New Delhi: After 25 years, the Indian stock market is witnessing a historic shift in investment trends. Domestic Institutional Investors (DIIs) have overtaken Foreign Institutional Investors (FIIs) in market participation, marking a significant turning point in the equity landscape.

DII Holdings Hit Record High
According to the latest September-quarter data, DII holdings in NSE-listed companies have surged to 18.26%, the highest level ever recorded. In contrast, foreign investors’ holdings have dropped to 16.71%, the lowest in 13 years. The crossover between DIIs and FIIs actually occurred in the March quarter, driven by strong domestic inflows.

Why the Shift?
Siddharth Bhamre, Research Head at Asit C Mehta Intermediates, explained that the widening gap between FII and DII holdings reflects the ‘retailisation’ of Corporate India. “Most mutual fund inflows now come from retail investors via SIPs, while institutional investments flow through trusts and family offices,” he said.

Mutual fund holdings in Indian companies have increased to 10.9% in this quarter, up from 10.56% in June, bolstered by steady SIP contributions from retail investors.

FIIs Retreat Amid Global Uncertainty
Between July and September, foreign investors sold shares worth ₹1.02 lakh crore, while domestic investors bought shares totaling ₹2.21 lakh crore. Senior Vice President at IIFL Capital Services, Shriram Velayudhan, noted that FIIs have been largely divesting due to global uncertainties, favoring emerging markets like the US, China, Taiwan, and South Korea. FII holdings in Indian companies have been declining steadily since December 2020, falling from 21.21% to 18.96% in June 2023, and dropping further since.

Domestic Flows Provide Market Stability
Despite the FII sell-off, continuous domestic inflows have kept the Indian market resilient. Pranav Haldia, Managing Director of Prime Database Group, stated, “Earlier, FII withdrawals would cause sharp market declines. Now, domestic investors provide critical support, cushioning the market against volatility.”

Conclusion
This unprecedented surge in DII activity underscores the growing power of Indian retail and domestic institutional investors in shaping the market’s trajectory, reducing reliance on foreign capital, and strengthening market stability.