Mutual funds push DII buying towards record high amid FII selling in India's stock market

DIIs, mainly mutual funds and insurance firms, have bought over $59 billion worth of equities, nearing last year’s all-time high. FIIs have taken out $14 billion so far in 2025 amid a rotation into China’s rallying markets.

Onshore investor confidence is key, as their consistent participation supports the market while Indian equities trail regional peers. Concerns that the US’s crushing 50% tariff on the country’s exports could hurt growth and already weak company profits have dented sentiment. The benchmark NSE Nifty 50 Index is up about 4% this year, compared with China’s 15% gain.

“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.

Most of the recent inflows have been driven by retail participation, with more than $3 billion pouring into recurring investment plans in recent months.

This habit of putting money into equity mutual funds is firmly entrenched, Christopher Wood, global head of equity strategy at Jeffries Financial Group Inc., wrote in a note. That’s as households continue to move their money away from traditional savings options like bank deposits, gold and property.

As a result, local institutions’ ownership of listed firms hit a record high of nearly 18% in March, surpassing foreign investors’ stake, according to Prime Database.

To be sure, Indian equities have lagged behind their Asian peers this year, partly due to foreign outflows amid concerns over elevated valuations and expectations of muted returns.

However, analysts remain optimistic despite recent volatility and concerns over the drag from US tariffs, given the persistent support from domestic funds.

“Indian investors are not disturbed by global developments, their faith in local shares remains steadfast” OmniScience Capital’s Gupta said.