Key Points

Mutual funds were the largest driver of this buying spree, purchasing Rs 3.65 lakh crore, aided by monthly SIP inflows of more than Rs 25,000 crore, while their cash holdings remained elevated at Rs 1.98 lakh crore in August.

Insurance companies and pension funds added more than Rs 1 lakh crore, with the remainder coming from portfolio managers, alternative funds, banks, and other institutions.

But analysts suggest that early signs of slowdown in momentum are emerging as market returns stagnate and global headwinds weigh on sentiment.

Despite robust inflows from DIIs, Indian equities have lagged global peers, with the Sensex having gained just 2 per cent and the Nifty 4 per cent in 2025 in dollar terms, compared with double-digit advances in major Asian and Western markets.

Market onlookers doubt the sustainability of mutual fund inflows even as equity fund inflows were Rs 33,430 crore in August and Rs 42,702 crore in July.

They took cues from rising redemptions from small-cap and thematic funds as investors booked profits and diverted money into real estate. Further GST rationalisation and festive spending, such as home renovation, could put pressure on household savings, limiting fresh allocations to equities as India’s consumption cycle enters a high-growth phase.

Meanwhile, foreign institutional investors (FIIs) remained net sellers, dumping Rs 1,80,443 crore so far in 2025 after selling Rs 1.21 lakh crore last year.

However, FIIs have been consistently buying through the primary market even while selling through the exchanges, and they have bought Rs 1,559 crore worth of equities in September.

As lacklustre earnings, stretched valuations, and uncertainty over US tariffs act as headwinds, analysts feel that there is a high likelihood of above 15 per cent growth in corporate earnings in FY27 leading to a turnaround in FPI sentiments.

- IANS