Key Points

Despite recent volatility on the Dalal Street, the counter-buying by DIIs in response to significant selling by FPIs is greater than in past instances, including the 2008 Global Financial Crisis and the 2022 sell-off, a report from ICICI Securities said.

DIIs have pumped in over Rs 4 lakh crore into the Indian stock market this year, the largest inflow by this category in the cash market during the first seven months since 2007.

Despite this strong domestic support, the bouts of aggressive FPI selling in recent months have capped returns in Indian stock market. Indices across all market capitalisations have shown flat to negative performance over the past 12 months.

FPI inflows from April to June ranged from $1.2 to $2.3 billion while in July, the trend was reversed, with outflows reaching $2.9 billion, with continued selling in August.

ICICI Securities noted that prior to the FPI exodus in July 2025, foreign investors were net buyers across all market capitalisations in the first quarter of FY26. DIIs and FIIs accumulated shares, while promoters, individual investors (barring small caps), and foreign direct investors provided the equity supply.

In July 2025, FPIs pulled out $2.9 billion from India. In contrast, Taiwan attracted $18.3 billion, Japan $16.1 billion, and South Korea $4.5 billion in inflows. In August, India experienced further outflows, along with South Korea. Japan gained $12.5 billion, and Indonesia drew $515 million.

In just seven months of 2025, DIIs accounted for over 80 per cent of total inflows for 2024, providing essential support to the market. DII inflows YTD in 2025 reached 2.2 per cent of the average Nifty market capitalisation, marking the highest level since 2007.

- IANS