Domestic institutional investors (DIIs), which had a record year in terms of net buying in 2024, are continuing their aggressive buying in the current calendar year with the cumulative buying already crossing the Rs 1 lakh crore mark even as their foreign counterparts are selling Indian shares in huge quantum.
According to NSE data, DIIs have invested Rs 1.2 lakh crore in equities since January, whereas FIIs have offloaded Indian stocks worth almost a similar amount –Rs 1.06 lakh crore. Last year, DIIs were net buyers at over Rs 5.22 lakh crore in equities, marking a record high, even as FIIs ended the year as net sellers at Rs 427 crore.
While domestic inflows have provided some support during the ongoing volatility, both the benchmark indices Sensex and Nifty have declined over 3 percent each so far this year, while the broader markets, represented by the BSE MidCap and BSE SmallCap indices have plummeted more than 20 percent each.
Brokerage firm Jefferies, in its latest report, has cautioned that the steady inflow of retail funds into India’s equity mutual funds is at risk of slowing as market returns weaken. A potential decline in household investments in domestic equities could further weigh on Asia’s fourth-largest equity market, which has been in a downward trend since late September due to an ongoing earnings slowdown and persistent foreign fund outflows, it said.
Meanwhile, experts believe that going ahead while DIIs may moderate their pace of buying in case of prolonged weakness they are unlikely to stop investing altogether. Markets are now approaching their long-term PE averages, making valuations more attractive.
Additionally, steady SIP inflows of over Rs 25,000 crore per month ensure that DIIs have a continuous liquidity pipeline. Institutional preference for Indian equities remains high due to stable macroeconomic conditions and limited alternatives, while earnings growth in key sectors like banking, auto, and consumption further supports continued allocations, say experts.
Narinder Wadhwa, Managing Director & CEO of SKI Capital services said in the near term, markets may remain volatile due to FII selling, global uncertainties such as US Federal Reserve policy, geopolitical risks, and Trump’s recent tariffs. However, strong support is expected around the 22,300-22,500 levels on the Nifty, where fresh buying could emerge. Medium-term recovery prospects remain intact, driven by RBI’s rate cuts, robust domestic demand, and long-term economic growth drivers, he said.
Experts further add that sectoral rotation will play a crucial role, with banking, consumption, and infrastructure likely to outperform, while high-valuation sectors like IT and new-age tech may face pressure. Overall, while short-term corrections are possible, DIIs are expected to continue their support, preventing a deep market correction unless a major external shock occurs.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
