₹4.9 Lakh Crore DII Buying vs FII Selling: The Rise of Domestic Investors

Foreign investors have been net sellers of Indian equities for most of the last two years.

Yet Indian markets haven’t cracked.

Why?

Because domestic institutions have quietly stepped in to fill the gap.

In June 2026, this shift became especially visible when Domestic Institutional Investors, or DIIs, overtook foreign institutional investors in cash market share.

DIIs accounted for 13.7 per cent of cash market turnover in June 2026, compared with 13.4 per cent for FIIs.

A year earlier, in June 2025, DIIs had a 14.1 per cent share, while FIIs stood higher at 14.9 per cent.

Even during FY26, FIIs remained slightly ahead, with a 14.6 per cent share compared with 14.2 per cent for DIIs.

But by June 2026, the gap had flipped.

DII share rose sharply from 11.9 per cent in May to 13.7 per cent in June, while FII share declined from 14.2 per cent to 13.4 per cent.

This crossover may look small, but it reflects a much larger shift happening in Indian markets.

Over the last decade, foreign flows have remained volatile, while domestic flows have grown much stronger.

In 2014, FPIs invested around $16.1 billion in Indian equities while DIIs recorded net outflows.

By 2022, the picture had reversed, with FPIs withdrawing $16.5 billion while DIIs invested $35.7 billion.

The gap widened further in 2024 and 2025. DII inflows reached around $63 billion in 2024 and $90.4 billion in 2025, even as foreign flows remained weak or negative.

As of June 30, 2026, FPIs had recorded net outflows of around $29.3 billion, while DII inflows stood at about $50.4 billion.

This shows that domestic institutions have increasingly stepped in during periods when foreign investors have pulled money out.

The consistency of this buying is also important.

As of June 2026, DIIs had been net buyers of Indian equities for 35 consecutive months.

Cumulative DII equity inflows in FY27 up to July 16 stood at around ₹2.4 lakh crore.

Foreign flows, meanwhile, remained far more volatile.

FPIs recorded outflows in five of the first six months of 2026, with March alone seeing withdrawals of around $12.7 billion. July brought some relief, with FPIs investing around $1.6 billion up to July 16, their first positive month since February.

Even then, cumulative FPI equity flows in FY27 remained negative at around $13.5 billion.

So why have foreign investors been pulling money out of India?

High valuations and softer earnings growth have made Indian equities less attractive relative to some other markets.

At the same time, global capital has shifted towards AI-heavy markets like the US.

Rupee weakness has also weighed on foreign returns, as currency depreciation can reduce gains when converted back into dollars.

Adding to this, trade tensions, geopolitical risks and broader global uncertainty have also made investors cautious.

But while foreign money has been moving out, domestic money has continued coming in.

Retail investors are powering a large part of this buying through mutual funds.

Equity mutual funds received net inflows of ₹28,973 crore in June 2026. That marked the 64th consecutive month of positive equity mutual fund inflows.

Monthly SIP contributions also remained strong at ₹31,781 crore. This steady flow of retail savings gives mutual funds a recurring pool of capital to invest.

This is one of the biggest structural changes in the Indian equity market.

A decade ago, large foreign outflows had a bigger impact because domestic institutional participation was much smaller.

Today, steady household savings flowing through mutual funds provide another source of liquidity.

However, the shift is not complete.

FIIs still dominate equity futures, accounting for 31.5 per cent of turnover in June 2026, compared with 13.8 per cent for DIIs.

So while domestic institutions have moved ahead in the cash market, foreign investors remain important for derivatives and short-term market sentiment.

The broader trend, however, is clear.

Indian markets are becoming less dependent on foreign money as SIP flows, mutual fund participation and DII investments build a stronger domestic investor base.

FPI selling can still affect markets, but DIIs now have greater capacity to absorb part of that pressure.

In simple terms, foreign investors remain important, but domestic savings are becoming an increasingly powerful force in Indian equities.

Source:

NSE Market Pulse_July 2026