Domestic investors continue to offset FII selling amid govt booster to woo foreign capital
Mumbai, June 6
While foreign institutional investors remained sellers this week, with net outflows of Rs 31,114 crore, domestic institutional investors continued to absorb the supply, investing Rs 33,933 crore during the same period, as the government and the RBI introduced several measures to attract foreign capital.
The ability of DIIs to offset FII selling has been one of the primary reasons why Indian markets have avoided a deeper correction despite global uncertainties, according to market watchers.
FIIs remained net seller in all the five-trading session during the week, while DIIs remained net buyer in all the five-trading session.
FII ownership as a percentage of total Indian equities has fallen from 20.2 per cent in May 2016 to 14.4 per cent in May 2026, Meanwhile, DII ownership as a percentage of total Indian equities has risen over the years, reaching 18.7 per cent in March 2026, said analysts.
Benchmark indices traded in a range with a corrective bias during the week, as escalating geopolitical tensions dimmed hopes of a near-term US-Iran deal.
Concerns over Iran's nuclear ambitions, Strait of Hormuz, persistent FII outflows and elevated oil prices weighed on sentiment.
The RBI maintained a status quo by holding the repo rate steady at 5.25 per cent.
"Simultaneously, investor confidence was significantly boosted by the government's decision to exempt Foreign Institutional Investors (FIIs) from capital gains tax on interest earned from government securities," said Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking.
Nifty started the week on a soft note and formed an intra-week low of 23,151 on Wednesday session. However, index recovered marginally in the second half of the week to close around 23350 levels down by 0.8 per cent.
Investor sentiment remained subdued amid ongoing geopolitical tensions, which continued to support elevated crude oil prices.
Going into the new week, the sustainability of domestic inflows and any signs of moderation in FII selling will be critical factors to watch, said analysts.
— IANS
Reader Comments
The government is doing whatever it can to keep the markets stable. But honestly, these geopolitical tensions and oil prices are a big worry. Strait of Hormuz issue can hit us hard. Hope the RBI and govt have more plans ready. 🤞
FII ownership falling from 20% to 14% over a decade is a big trend. We are becoming less dependent on foreign money. But DIIs won't always be there to rescue if global panic sets in. Markets are not completely de-coupled from global risks.
As a small investor, this is reassuring. Our mutual funds and insurance companies are buying when foreigners run away. Shows India's story is strong. But one criticism - the tax exemption to FIIs on govt securities feels like we are bending over backwards for them. Should have been done more carefully.
Interesting to see domestic ownership now exceeding FII at 18.7% vs 14.4%. This is a structural shift. But I wonder how much of this DII buying is from retail flows through SIPs. If retail sentiment turns, DIIs may not be able to keep absorbing.
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