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FIIs Return as Net Buyers in Indian Markets Amid Valuation Ease

Foreign institutional investors turned net buyers in Indian equities over nine sessions, purchasing over $2 billion worth of shares and supporting a market rally. However, domestic institutional investors now hold a slightly larger share in the Nifty50 than foreign investors, underscoring a fundamental shift toward stronger domestic participation. This change is driven by sustained mutual fund SIP inflows, rising retail investment, and allocations from insurance and pension funds. Analysts note this growing dominance of domestic capital provides more stable liquidity and makes India's equity market structure more resilient.

Key Points: FIIs Turn Net Buyers in Indian Equities After Sell-Off

  • FIIs bought over $2B in 9 sessions
  • DIIs hold larger Nifty50 share than FIIs
  • Shift driven by strong domestic SIP and retail flows
  • Rally saw Sensex, Nifty rise over 3%
  • Market structure becoming more resilient
2 min read

FIIs turn net buyers in Indian markets as valuations moderate

Foreign investors bought over $2B in Indian shares recently, but domestic institutions now hold a larger Nifty50 stake, signaling a structural market shift.

"The increasing dominance of domestic money provides a more stable, long-term source of liquidity - Himanshu Srivastava, Morningstar"

Mumbai, Feb 10

Foreign institutional investors became net buyers in Indian equities over the last nine trading sessions, purchasing more than $2 billion worth of shares supporting a rally, according to provisional data from exchanges.

On February 9, they bought shares worth Rs 2,223 crore on a provisional basis, according to exchange data.

However, experts cautioned it was too early to judge the medium‑term durability of the flow, adding that the trend could continue if trade stability persists, corporate earnings improve, and the dollar continues to weaken.

Domestic institutional investors (DIIs) were also active, purchasing equities worth more than Rs 8,973 crore over the same period.

DIIs holding a larger share than FIIs in the Nifty50 underscores a fundamental shift toward stronger domestic participation in India's equity markets.

This reflects the growing strength of domestic capital pools. The change has been driven by sustained mutual fund SIP inflows, rising retail participation, and steady allocations from insurance and pension funds, even as FIIs turned cautious amid global macro uncertainty, elevated overseas rates, and a stronger dollar, said analysts.

"The increasing dominance of domestic money provides a more stable, long-term source of liquidity, reduces reliance on volatile foreign flows, and could help cushion markets during global risk-off phases, ultimately making India's equity market structure more resilient and aligned with domestic growth fundamentals," said Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India.

According to analysts, the renewed foreign interest followed a recent sell‑off that improved valuations relative to other Asian markets.

Further the framework for the India-US trade deal eased uncertainties, stabilised bond yields and bolstered risk appetite.

Benchmark indices Sensex and Nifty each rose over 3 per cent during the rally, while the BSE MidCap 150 and BSE SmallCap 250 surged around 5.66 per cent and 6.3 per cent, respectively.

Market participants pointed to the Reserve Bank of India's dovish stance, improving GDP, robust earnings outlook and steady domestic flows as supporting forces in Indian markets that could attract foreign inflows.

A recent report from Motilal Oswal Securities showed that as of December 2025 quarter, domestic institutions held about 24.8 per cent of the Nifty50, marginally higher than foreign investors at around 24.3 per cent.

Analysts said the FII ownership marked an eight‑quarter low for foreign ownership, and a deepening domestic capital base, adding that the shift is structural rather than cyclical.

- IANS

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Reader Comments

S
Sarah B
Interesting analysis. As an expat investing in India, the reduced volatility from domestic flows is encouraging. However, the article rightly cautions - one week of buying doesn't make a trend. Need to see consistent policy stability.
P
Priya S
Mid and small caps surging over 5% is where the real action is! That's where retail investors like me are putting our money. Good to see DIIs holding more than FIIs now. Our market, our rules. 💪
R
Rohit P
While the sentiment is positive, let's not get carried away. Corporate earnings need to actually deliver on the "robust outlook". Many stocks are still overvalued. Cautious optimism is the key.
K
Karthik V
The structural shift is the most important takeaway. This isn't a temporary phase. With EPFO, NPS, and millions of SIPs, Indian money is building a fortress for our markets. FIIs will have to play by our strengths now.
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Michael C
The India-US trade deal framework seems to be a significant catalyst that's under-reported here. Reducing trade uncertainty is huge for long-term foreign investment. Good to see both domestic and foreign forces aligning.

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