India’s capital is coming home & and it’s not stopping at the Sensex

India’s markets have been viewed through the lens of foreign capital flows.

By Sandeep Sinha 

In March 2025, India crossed a quiet but powerful milestone: for the first time in 22 years, domestic institutional investors (DIIs) owned more of the National Stock Exchange (NSE) listed firms than foreign institutional investors (FIIs). DII ownership rose to 17.62%, edging past FII holdings at 17.22%. This wasn’t just a statistical crossing. It was a symbolic one. For decades, India’s markets were viewed through the lens of foreign capital flows. “When FIIs buy, the market rises,” was conventional wisdom. Increasingly, it’s being replaced by: “When FIIs sell, DIIs step in.”

But the true significance of this shift lies not just in public equities. The very forces fuelling the rise of DIIs – deepening retail participation, maturing financial institutions, and a generational shift in household savings behaviour – are also moving into India’s private capital markets. And unlike past cycles, this wave is being built on Indian conviction.

Between March 2010 and March 2025, DII ownership in NSE-listed companies rose from 11.7% to 17.6%. FIIs, by contrast, moved from 14.5% to 17.2%. But the real story lies in the net flows. In 2024 and 2025 (year-to-date), even as FIIs withdrew ₹3.02 lakh crore and ₹1.41 lakh crore respectively, DIIs invested ₹5.26 lakh crore and ₹2.17 lakh crore respectively into Indian equities. These aren’t opportunistic bets. They’re a signal of sustained confidence.

In January 2025 alone, FIIs offloaded more than ₹87,000 crore. In earlier cycles, most notably in October 2008, a ₹16,000 crore sell-off by FIIs triggered a 25% market crash. But this time, the Nifty barely dipped 2%, cushioned by ₹86,000 crore of DII inflows. Indian markets are no longer beholden to global sentiment; they are finding their own centre of gravity.

This newfound resilience is the result of both policy and psychology. Record-high SIP enrolments, insurance-linked equity allocations, and EPFO-linked market exposure have structurally altered the retail investor base. Equity investing has become embedded in India’s financial culture, not just among institutions, but in middle-class households.

While this DII transformation in listed equities is well documented, what’s less discussed, but perhaps more consequential, is the shift happening in private markets. According to recent data from the Oister x CRISIL report, resident Indian LPs now account for over 76% of capital commitments in Category II Alternative Investment Funds (AIFs). Just three years ago, that figure was 73%. Institutional LPs now comprise 66% of the LP base, up from 60.5% in FY22.

This subtle but steady trend is ushering in a new era: Indian capital is no longer content with indexing public growth, it wants to participate in building the next wave of private enterprises. From pensions and insurers to Tier-2 family offices and HNI portfolios, domestic investors are seeking sector-led exposure in healthcare, logistics, consumer tech, and climate. And they’re doing it with the same discipline they once reserved for traditional asset classes.

This isn’t just a capital market shift. It’s a strategic inflection point. If Atmanirbhar Bharat was about building India with Indian innovation, this is the capital counterpart: Atmanirbhar Capital. The implications are profound. Just as DIIs have stabilised public markets during periods of FII volatility, long-term domestic LPs can insulate private markets from global funding cycles.

Domestic capital tends to have longer-term outlooks which are more aligned with India’s macro cycle, unlike foreign LPs seeking quick IRRs or USD exits. When Indian capital backs Indian innovation, it encourages more sustainable governance, better compliance, and long-term business building. The rise of Indian LPs is also catalysing interest in secondaries, offering structured liquidity in private markets, much like IPOs once did.

Oister’s internal estimates suggest that by FY28, domestic LPs could account for over 80% of all AIF fundraising in India, especially as regulatory frameworks evolve and digital access platforms deepen. This is no longer about appetite, it’s about ambition. The Indian investor today is no longer satisfied with passive exposure. This is a generation that has tasted wealth creation and now wants to shape it. They are not just buyers of India; they want to be builders.

This marks a definitive shift. From capital that chases momentum to capital that funds transformation. From foreign dependence to financial sovereignty. For decades, India’s markets sought external validation from FIIs and global LPs. That era is fading. The next chapter belongs to capital that speaks the same language as the entrepreneur. Capital that understands not just the balance sheet, but the ambition behind it.

From Sensex holdings to startup cap tables, Indian investors are taking charge, not just with money, but with belief. And that, more than any policy reform or quarterly number, might be India’s most powerful financial transformation yet.

(Sandeep Sinha, Co-CEO and Co-founder of Oister Global.) 

Views are personal, and do not represent the stance of this publication.