DII investments cross Rs 3 lakh crore in 2025 so far powered by MFs, banks

Domestic institutional investors, such as mutual funds, banks, insurers, and retirement funds, have invested more than Rs 3 lakh crore into Indian equities so far in 2025, the second-highest annual inflow since 2007, trailing only 2024. The latest six-month inflow also marks the strongest half-yearly investments since records began.

With more than six months still to go, experts expect this momentum to strengthen, led by continued inflows from retail investors and mutual funds.

While DIIs investment pace eased during March and April, May witnessed a sharp revival with inflows of Rs 66,000 crore, followed by June buying worth Rs 29,000 crore so far — primarily fueled by a surge in block deals. This uptick not only improved liquidity but also lifted overall market sentiment.

For context, DIIs invested a record Rs5.23 lakh crore in equities in 2024—the highest ever in a single year. This compares to Rs1.82 lakh crore in 2023 and Rs2.76 lakh crore in 2022.

DIIs have remained a consistent stabilizing force, actively absorbing supply during periods of market uncertainty. Their renewed aggression in May highlights sustained confidence in India’s corporate earnings outlook. Contributing factors include a weakening dollar against the rupee and expectations that India’s economic growth will remain resilient amid global tariff pressures. experts said.

Ajay Garg, CEO of SMC Global Securities, noted that the recent 50 basis point repo rate cut and liquidity support via CRR reduction are expected to boost borrowing, consumption, and investment. These measures, alongside the anticipated US-India trade agreement, should further support market optimism.

Among DIIs, mutual funds led the charge with over Rs 1.98 lakh crore in net purchases in Indian equities so far in 2025. Experts said monthly SIP inflows now exceed Rs 25,000 crore, underscoring rising investor faith in India’s long-term growth trajectory, anchored by macroeconomic stability, favorable demographics, and policy continuity.

Conversely, banks have been net sellers, offloading over Rs 9,450 crore, while insurance firms and pension funds have contributed positively with net investments of Rs 42,220 crore and Rs 17,543 crore respectively.

Looking ahead, Nikunj Saraf, VP at Choice Wealth, highlighted three key drivers of continued DII participation: reliable retail SIP flows, a supportive policy stance from the RBI amidst easing inflation, and potential earnings surprises in the upcoming results season. These factors could trigger fresh allocations across sectors.

On the global front, any easing in external pressures—be it dovish signals from the US Federal Reserve or stability in major economies—would only strengthen domestic buying interest.

So far, Indian markets Sensex and Nifty have risen 5.5 percent and 6.2 percent respectively, while the broader markets — BSE MidCap has risen 0.3 percent and SmallCap has lost 2 percent.

Prashant Tapse of Mehta Equities cautioned that while valuations are now moderately stretched, particularly on a trailing P/E basis, strong liquidity and resilient micro fundamentals are driving the rally. Sustaining premium valuations will require robust earnings growth in FY26. Any disappointment in earnings or global macro shocks (e.g., Fed policy shifts, geopolitical risks) could lead to a market correction or consolidation phase.

Investors are advised to maintain a balanced approach, focus on fundamentally strong businesses, and use any near-term volatility as an opportunity to build long-term positions—especially with Q1 FY26 earnings and rural demand trends in focus, Tapse added.

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