DIIs Hit Rs 69.8 Lakh Crore Mark, Surpass FIIs for the First Time

In a major milestone for India’s stock market, Domestic Institutional Investors (DIIs) have overtaken Foreign Institutional Investors (FIIs) in equity holdings for the first time. This shift highlights the rising strength of local investments as global uncertainties and changing investor preferences reshape the market.

As of March 2025, the assets under custody of DIIs stood at Rs 69.80 lakh crore, while those of FIIs totaled Rs 69.58 lakh crore. Although the gap may appear narrow, the trend represents a major turning point in Indian capital markets, where FIIs have historically commanded the lion’s share of institutional inflows. Source: Moneycontrol/CNBCTV18

The transition reflects the maturing nature of India’s investor base and signifies a potential rebalancing of market forces, where domestic money plays an increasingly central role in driving market sentiment.

A Landmark Shift in Equity Ownership

According to the latest data from ACE Equities, DIIs held approximately 16.91% of Indian equities as of the March 2025 quarter, slightly surpassing FIIs, whose holdings dropped to 16.84%, marking a 50-quarter low. This marginal but symbolically significant shift highlights how domestic capital has steadily gained prominence against foreign capital, particularly in a volatile global macroeconomic environment. Source: Moneycontrol

This shift did not happen overnight. It follows months of consistent domestic buying, which began gaining momentum toward the end of September 2024. During this period, DIIs invested a whopping Rs 3.97 lakh crore, even as FIIs withdrew over Rs 2.06 lakh crore, per data from the National Stock Exchange (NSE) and National Securities Depository Ltd. (NSDL).

What’s Driving the Change?

The growing preference for DII-led investments reflects a lasting change in investor behavior. Market experts believe this shift isn’t only temporary but a long-term trend. While FIIs have been selling steadily due to global issues like geopolitical tensions and rising interest rates, domestic investments have stayed strong. 

This strength is mainly driven by regular investments from retail investors through mutual fund SIPs, which have recently hit record highs. While this shift may not immediately change market valuations, it could help reduce market ups and downs since domestic money tends to stay invested longer, unlike the more volatile FII flows.

A Trend in the Making

This shift has been brewing over the past few years. Since 2021, DIIs have consistently been more aggressive investors in Indian equities than their foreign counterparts. Here’s a year-wise breakdown:

• 2021: DIIs invested over Rs 98,000 crore, while FIIs added a modest Rs 26,000 crore.
• 2022: DIIs stepped up significantly, pouring in over Rs 2.76 lakh crore, as FIIs pulled out a massive Rs 1.28 lakh crore.
• 2023: Investment activity nearly balanced out, with DIIs contributing Rs 1.81 lakh crore and FIIs putting in Rs 1.74 lakh crore.
• 2024: DIIs again took the lead with Rs 5.23 lakh crore in net investments, even as FIIs remained net sellers to Rs 8,000 crore.
• 2025 (so far): The trend continues, with DIIs investing over Rs 2.1 lakh crore, and FIIs withdrawing over Rs 1.07 lakh crore.

These figures underscore a sustained pattern of progressively stronger domestic capital and more erratic foreign flows.

Retail Investors and SIPs: The New Powerhouses

The surge in retail investor participation is a key contributor to the riseof DII . Thanks to improved digital infrastructure, investor education, and long-term awareness campaigns, platforms like mutual funds, pension schemes, and insurance-based investments have attracted growing retail interest.

Systematic Investment Plans (SIPs), in particular, have become a vital component of this trend. Monthly SIP contributions have remained consistently above Rs 15,000 crore, indicating not just the volume but also the discipline of Indian retail investors. This shift is helping transform the Indian market from externally driven to internally funded and supported.

FIIs Still Important, But Less Predictable

While DIIs are rising fast, FIIs are still key players in India’s stock market. Their large and quick trades often influence short-term market movements. However, their behavior has become more unpredictable, driven by global factors like U.S. rate hikes, a strong dollar, or geopolitical tensions. This has led to more frequent sell-offs during periods of market uncertainty.

Market analysts note that FII participation has been inconsistent in recent years. Their periodic outflows have often been synchronized with major corrections in the Indian equity markets. In contrast, domestic flows have acted as a stabilizing counterforce, reducing the amplitude of these corrections.

Implications for Indian Markets

This shift in ownership has several important implications for the future of Indian markets:

1. Lower Volatility: With more stable domestic capital entering the markets, volatility may moderate over time.
2. Greater Resilience: Reduced dependence on foreign flows will likely make Indian equities more resistant to global shocks.
3. Policy Confidence: A rising share of domestic investments reflects growing confidence in India’s economic policies and market infrastructure.
4. Market Depth: More retail and DII participation contributes to broader and deeper capital markets.
5. Shift in Narrative: The traditional belief that Indian markets move only in response to FII action may weaken as domestic flows become dominant.

Conclusion

The overtaking of FIIs by DIIs in equity holdings marks more than a statistical milestone—it’s a paradigm shift. It shows the increasing maturity of India’s investment ecosystem, where homegrown capital now plays the lead role. While foreign investors will continue to remain influential, their role is balanced by strong domestic inflows that are consistent, reliable, and rooted in long-term financial planning.

This shift also aligns with the broader theme of ‘Atmanirbhar Bharat’, as India becomes a global investment destination and a self-sustaining financial powerhouse. 

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