Domestic institutional investors (DIIs) are set to invest a record-breaking Rs 6 lakh crore in Indian stocks in 2025 – the highest annual investment since BSE data tracking began in 2007. This strong domestic surge in banks, development financial institutions (DFIs), insurance companies, pension funds and mutual funds outpaced investments worth Rs 5.26 lakh crore for calendar year 2024, reflecting a maturing local investor base amid global challenges.

According to NSDL data, this huge inflow offset a total of $23.3 billion (over Rs 2 lakh crore) inflows by foreign portfolio investors (FPIs) as foreign funds grappled with US tariff threats, elevated valuations and changes in investment allocation to emerging markets. FPIs infused Rs 49,590 crore through primary markets and alternative channels, but volatility dominated the secondary market, reminiscent of the $22.3 billion outflow during the geopolitical turmoil in 2022.

Strategic buying by DIIs during the FPI selloff—reflecting post-Lehman resilience—absorbed the blow from promoters’ stake dilution and PE profit-booking. Sector-wise, they took advantage of the decline to increase investment in BFSI, capital goods, healthcare and auto. Mutual funds crossed Rs 25,000 crore monthly with SIP inflows acting as a safeguard against volatility.

Analysts expect continued strength in calendar year 2026, barring a 30-40% global decline. Sonam Udasi of Tata Asset Management estimates, “SIP flexibility and increasing retail participation will drive DIIs beyond the 2025 peak.” Tariff relaxation may bring back FPIs, thereby narrowing the valuation gap with competitors.

Still, the stagnant stance of DII has not shown a broader uptick. Over the past 12 months, the index remained flat or fell amid a slowdown in earnings. Due to the recent rally, Sensex and Nifty gained 5.11% and 6.56% respectively – Sensex closed at 82,605 (+575 points) and Nifty at 25,324 (+178 points) on October 15. The smallcap and midcap indices lagged behind, down 5.6% and 1.6% respectively year-on-year, reflecting an uneven recovery.

As the festive muhurat trading time approaches, the dominance of DIIs signals India’s equity maturity, bracing the markets against external storms and keeping an eye on long-term structural growth.