Despite the drag from elevated US tariffs, expensive valuations, sluggish earnings outlook, and persistent selling by foreign investors, domestic institutional investors (DIIs), largely comprising mutual funds, have maintained confidence in the economy’s fundamentals.
Unfazed by these short-term challenges, they have poured record sums into equities through 2025, steadily accumulating Indian stocks at a strong pace, supported by growing retail investor participation.
Also Read | Mutual funds’ AUM surges over ₹10 lakh crore since last Independence Day
DIIs bought equities worth ₹5.13 lakh crore in the past eight months, as per the NSE data, achieving 97% of the full-year inflow of ₹5.26 lakh crore recorded in 2024 and nearly tripling the ₹1.81 lakh crore inflow seen in 2023. If this momentum continues over the remaining four months, inflows could cross ₹6 lakh crore for the first time.
They began the year with aggressive buying of ₹86,591 crore in January, followed by ₹64,853 crore in February. While inflows softened in March and April, they picked up pace again in May and June with ₹67,642 crore and ₹72,673 crore, respectively, largely driven by a surge in block deals.
The momentum continued in July and August, with additional inflows of ₹60,936 crore and ₹94,828 crore. Strong DII inflows have not only cushioned the impact of FPI selling but also led to a notable shift in institutional holdings across India Inc.
Also Read | Trent to Eternal: FIIs, DIIs raised stakes in these Nifty 50 cos in June
This structural shift, which developed over the past decade, gained substantial momentum after FY21. DII ownership in the June 2025 quarter rose 170 basis points year-on-year to an all-time high of 19.4%.
So far in 2025, FPI selling has crossed ₹1.60 lakh crore, bringing their shareholding in the Indian equity market to a record 15-year low.
Robust retail activity set to drive continued surge in DII inflows
Retail investors have been actively shifting their savings from traditional bank deposits to equities in recent years, aiming to participate in India’s growth story, with most opting for the mutual fund route to gain ownership in listed companies.
This growing participation has not only broadened the investor base but also provided a strong foundation for the market, encouraging many companies to raise funds through equities to capitalise on rising domestic demand. As a result, the overall size of the Indian stock market has expanded, recently surpassing Hong Kong to become the fourth largest globally.
Also Read | FPIs cut stake in NSE-listed stocks, DMFs strengthen hold to all-time high
At times, the steady inflows have even forced fund managers to pause or slow down SIP investments, as they found themselves running out of viable allocation opportunities.
In July, the assets under management (AUM) of mutual funds crossed ₹75 lakh crore for the first time, according to AMFI. Just half a decade ago, the industry’s AUM stood at ₹ ₹27.11 lakh crore, an addition of ₹48.24 lakh crore in only five years.
According to market experts, institutional inflows into the Indian stock market are expected to remain strong through the rest of 2025, supported by rising retail participation, greater awareness of market volatility, improving investment discipline, and increasing inflows from B-30 cities.
Also Read | Mutual funds: Investors raise their exposure to small and mid cap schemes
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.