Economic Overview
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By Namrata Udeshi Tholia
A 13-Year Low for FIIs And the Rise of India’s New Market Sovereignty
The balance of power in India’s markets has flipped.
For the first time in over a decade, foreign funds no longer command the largest institutional share of Indian equities. DII ownership has climbed to 18.26%, an all-time high. FII ownership has fallen to 16.71%, a 13-year low a symbolic shift, but one with real consequences.
The Big Turn
What began as a slow drift in early 2025 has now become a structural parting of ways. In the September quarter, FIIs sold Rs.1.02 lakh crore in the secondary market, while DIIs powered by unshakeable retail SIP flows bought Rs.2.21 lakh crore.
The crossover is the widest in 25 years.
This divergence reflects not just sentiment but two philosophies of capital.
Smart Sellers, Steady Buyers
Foreign investors are not abandoning India; they are waiting for it to become cheaper.
After a years-long rally, India stands among the world’s most expensive markets. Global funds, with the luxury of choice, are rotating to better-valued geographies.
But the scepticism is selective. October saw FIIs pour $1.2bn into IPOs the second-highest monthly tally this year marking their fourth straight month of preferring the primary market over the frothy secondary one.
The Domestic Counterweight
At home, retail money has become a market-moving force in its own right.
With mutual fund ownership hitting 10.9%, India now enjoys what economists call a “domestic cushion” local capital deep enough to soften shocks traditionally triggered by foreign outflows.
It is also a case study in home bias. Indian savers, convinced of the long-term superiority of the India story, continue allocating heavily to domestic equities despite premium valuations.
A New Market Regime
The result is a market held in delicate balance:
- Domestic flows: mandated, sticky, structurally bullish
- Foreign flows: cautious, price-sensitive, opportunistic
The unresolved question? What happens if SIP flows the backbone of the domestic bid slow just as FIIs are proven right about valuations?
For now, the market holds. But the symbolism is unmistakable.
India has entered a new era one where global capital watches, but domestic capital leads.
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