Domestic institutional investors (DIIs) have bought a record Rs 5.3 lakh crore worth of equities in 2025 so far, surpassing the full-year total of Rs 5.22 lakh crore in 2024, according to stock exchange data.
Mutual funds were the primary driver, purchasing Rs 3.65 lakh crore, supported by monthly SIP inflows exceeding Rs 25,000 crore, while cash holdings remained elevated at Rs 1.98 lakh crore in August. Insurance companies and pension funds contributed over Rs 1 lakh crore, with portfolio managers, alternative funds, banks, and other institutions accounting for the remainder.
Analysts, however, caution that early signs of a slowdown are emerging as market returns stagnate and global headwinds weigh on sentiment. Despite strong domestic inflows, Indian equities have lagged global peers: the Sensex has gained just 2 per cent and the Nifty 4 per cent in 2025 in dollar terms, compared with double-digit gains in major Asian and Western markets.
Market watchers are also wary about the sustainability of mutual fund inflows, even though equity fund inflows were Rs 33,430 crore in August and Rs 42,702 crore in July. Rising redemptions from small-cap and thematic funds, profit-booking, and diversion of investments into real estate, combined with GST rationalisation and festive spending, could pressure household savings, limiting fresh equity allocations.
Meanwhile, foreign institutional investors (FIIs) remained net sellers, offloading Rs 1,80,443 crore in 2025 after selling Rs 1.21 lakh crore in 2024. Nevertheless, FIIs have continued to participate in the primary market, buying Rs 1,559 crore worth of equities in September.
Analysts believe that despite current headwinds from lacklustre earnings, stretched valuations, and uncertainty over US tariffs, corporate earnings are likely to grow above 15 per cent in FY27, potentially turning around FPI sentiments.
-IANS
