DIIs Overtake FIIs in Indian Market Share for the First Time

For the first time, domestic institutional investors (DIIs) have surpassed foreign institutional investors (FIIs) in terms of their share of Indian equity markets. This shift marks a significant change in market dynamics, driven by persistent selling from FIIs amidst global trade uncertainties and market volatility.

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As of the March 2025 quarter, DIIs held 16.91% of Indian equities, slightly ahead of FIIs, whose holdings fell to 16.84%, the lowest in 50 quarters.

The Shift in Holdings: DIIs vs. FIIs

According to data from ACE Equities, DIIs’ assets under custody now stand at approximately Rs 69.80 lakh crore, compared to Rs 69.58 lakh crore for FIIs. This shift comes after a period of strong domestic buying, which began in late September 2024. During this period, DIIs invested over Rs 3.97 lakh crore, while FIIs withdrew more than Rs 2.06 lakh crore, as per figures from NSE and NSDL.

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DIIs have consistently outpaced FIIs in net investments since September 2024, with significant inflows during this period.

A Structural Shift in Investor Behavior

Siddharth Bhamre, Head of Research at Asit C. Mehta Investment Intermediates, emphasized the structural nature of this shift. He noted that while FIIs have been consistent net sellers in recent months, domestic flows, driven largely by retail investors via mutual fund SIPs, have remained strong. Although Bhamre does not foresee immediate major implications from this change, he believes it could reduce market volatility, as DII-driven capital tends to be more stable compared to the more transient nature of FII flows.

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The shift indicates a stabilizing role for DIIs, whose investment flows are generally more consistent and less influenced by global uncertainties.

Growing Domestic Participation: A Long-Term Trend

The trend of increasing domestic participation is not new. Since 2021, DIIs have consistently outpaced FIIs in terms of net investments. In 2021, DIIs invested over Rs 98,000 crore, while FIIs contributed just over Rs 26,000 crore. The trend continued in 2022, with DIIs investing over Rs 2.76 lakh crore, compared to FII outflows of Rs 1.28 lakh crore.

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From 2021 to 2025, DIIs have consistently invested more than FIIs, reinforcing the importance of domestic capital in driving market stability.

Recent Trends in FII and DII Activity

In 2023, both DIIs and FIIs were nearly at parity, with DIIs investing Rs 1.81 lakh crore and FIIs investing Rs 1.74 lakh crore. However, in 2024, DIIs took the lead again, investing Rs 5.23 lakh crore, while FIIs made net sales of Rs 8,000 crore. In 2025, so far, DIIs have invested over Rs 2.1 lakh crore, while FIIs have withdrawn over Rs 1.07 lakh crore.

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DIIs have been dominant in recent years, especially in 2024 and 2025, signaling stronger domestic investor confidence.

Expert Insights: The Role of Domestic Investors

Dhananjay Sinha, Co-Head of Equity & Research at Systematix Group, observed that FII participation has been inconsistent in recent years, with significant outflows during periods of global uncertainty. In contrast, retail investor participation, particularly through SIPs and other avenues, has shown steady growth. While FIIs remain important market players, their selling activities have coincided with market corrections, further highlighting the stabilizing role of domestic investors.

Highlight:
Despite the strong presence of FIIs, domestic retail investors have become increasingly important, particularly during periods of market volatility.