While global capital continues to gravitate towards artificial intelligence (AI)-linked investment themes, domestic institutional investors (DIIs) have remained firmly committed to Indian equities, pumping in a record ₹4,000 crore every trading day this calendar year. Their relentless buying has helped absorb unprecedented foreign portfolio investor (FPI) selling and prevented a deeper correction in the market.
Data from stock exchanges shows DIIs have purchased Indian equities worth ₹4.3 trillion in the first half of calendar year 2026 (H1CY26) across 106 trading sessions until June 9, the highest-ever inflow recorded for the January-June period.
In contrast, FPIs have sold shares worth ₹2.8 trillion during the period, according to National Securities Depository (NSDL) data, marking the largest H1 outflow on record.
Market experts say while global investors have redirected capital towards developed markets and AI-driven opportunities, domestic savings continue to find their way into equities through mutual funds (MFs), insurance products, pension schemes and alternative investment funds (AIFs).
A large part of the DII firepower has come from MFs. Active equity schemes attracted net inflows of ₹1.5 trillion during the first five months of CY26, exceeding the ₹1.4 trillion mobilised during the year-ago period. Meanwhile, MFs have injected over ₹2.7 trillion into listed stocks.
Participants say Indian households have few compelling alternatives as fixed-income instruments such as bank deposits and traditional savings products often struggle to deliver positive real returns after taxes and inflation. Overseas investing, meanwhile, remains constrained by regulatory limits and operational hurdles. As a result, equities continue to be viewed as one of the most effective avenues for long-term wealth creation.
“In many ways, SIPs (systematic investment plans) have become the modern equivalent of recurring deposits. Investors have developed the habit of setting aside a portion of their salary every month. The concepts of rupee-cost averaging and staying invested through market cycles have been reinforced over the years, creating a powerful behavioural shift among retail investors,” said U R Bhat, co-founder of Alphaniti Fintech.
The resilience of DII flows was particularly evident in the broader market. Despite sustained foreign selling, the Nifty Midcap 100 and Nifty Smallcap 100 remained largely flat this year, outperforming the benchmark Nifty, which declined around 11 per cent.
Analysts attribute this divergence partly to the nature of FPI selling, which has been concentrated in large, liquid stocks that dominate benchmark indices. Strong domestic inflows, meanwhile, have continued to support mid and smallcap shares, where local investors account for a larger share of ownership.
The contrast becomes starker when compared with other Asian markets. AI-driven markets such as South Korea and Taiwan have attracted substantial foreign capital and outperformed this year, while Indian equities have contended with concerns over elevated energy prices amid geopolitical tensions involving Iran, Israel and the United States.
“There are currently no signs of a meaningful reversal in FPI flows given prevailing geopolitical uncertainties. In this environment, DIIs are likely to remain buyers. If domestic institutions do not absorb the supply, the market could witness a much sharper correction. Moreover, DIIs now own a larger share of Indian equities than foreign investors, making market stability an important consideration for them,” said Chokkalingam G, founder of Equinomics Research.
The strategy of buying when FIIs sell pays off in the long run, he added.
“Since the 2008 Lehman Brothers crisis, a clear pattern has emerged. Whenever FPIs sold aggressively due to fear or uncertainty, DIIs stepped in as buyers, often in larger amounts. This was visible during the global financial crisis, the disruptions around 2016 and the Covid-19 pandemic. Markets eventually recovered, allowing domestic institutions to benefit from accumulating quality assets at attractive valuations,” said Chokkalingam.
