FII vs DII: The Battle That Reshaped Indian Stock Markets

Wing Commander Pravinkumar Padalkar
Aug 30, 2025
3 min read

Who Are FIIs and DIIs?

FIIs / FPIs (Foreign Institutional/Portfolio Investors): Overseas funds, sovereign wealth funds, and global asset managers that buy Indian equities and debt. They remain sensitive to global cues.
DIIs (Domestic Institutional Investors): Indian mutual funds, insurance companies, pension funds, and banks.

Historic Milestone

Over the last decade, the Indian equity market has undergone a profound transformation in its investor base.

Once dominated by FIIs, the market is now witnessing the rise of a confident and empowered DII class.

This is reshaping market behaviour, stability, and growth.

As of March 31, 2025, a historic milestone was reached in the Indian stock market. DII ownership surpassed FII, with DIIs holding 17.62% of NSE-listed companies’ equity against FIIs’ 17.22%.

For the first time in modern history, domestic capital has overtaken foreign money. This shift reflects the deepening financialisation of Indian households and marks a turning point in who drives the market’s long-term trajectory.

Just ten years ago, the picture looked very different.

In 2015, FIIs held nearly twice the share of DIIs, and their capital flows dictated market direction almost every day.

Whenever foreign money turned risk-averse, Indian equities stumbled, recovering only when inflows resumed.

Today, thanks to rising domestic savings channeled through mutual funds, insurance, pension funds, and SIPs, the balance has shifted.

What was once an FII-dominated market has evolved into a dual-engine system powered equally by global and domestic capital.

When discussing the influence of FII, it is important to distinguish between ownership and participation:

Ownership is a snapshot of how much equity FIIs or DIIs hold at a point in time.
Participation reflects the actual buying and selling activity that drives short-term market moves.

To better understand how these dynamics have evolved over the past decade, let’s analyse the ownership and participation datasets from 2015 to 2025, illustrated in the tables below.

1. Ownership Trends (2015–2025)

FIIs’ share steadily declined over the decade from 21 % to 17 %
DIIs’ share rose consistently, culminating in DIIs overtaking FIIs in 2025.
This signals a structural shift in India’s equity market composition, from foreign dependence to domestic strength.

2. Participation Trends (2015–2025)

FIIs remain volatile and reactive — quick to exit during crises and return in bullish phases.
DIIs are steadier, counter-cyclical buyers — often stepping in when FIIs sell, cushioning volatility.
Net flow data highlights this contrast: FIIs drive sharp rallies and corrections, while DIIs provide stability and liquidity.

Impact on Indian Markets

India’s investor landscape is evolving, and the effects on market trends and volatility are becoming increasingly clear.

1. Market Stability and Volatility

The rising share and consistent participation of DIIs have helped mitigate volatility caused by large and sudden FII inflows/outflows.
During disruptive events, such as demonetisation in 2016 and the pandemic crash in 2020, DIIs played a crucial role in cushioning falls, ensuring liquidity, and supporting confidence.

2. Sectoral Preferences and Market Themes

FIIs typically prefer export-oriented and globally comparable sectors such as IT, pharma, and cyclicals linked to global trade.
DIIs lean toward India’s domestic growth story — favouring financial services, FMCG, infrastructure, and healthcare.
This divergence explains why certain sectors enjoy sustained momentum, while others swing with global cycles.

3. Liquidity and Long-Term Growth

SIP inflows hit a record ₹28,464 crore in July 2025.
Equity mutual funds recorded net inflows of ₹42,702 crore in July.
The number of active SIP accounts rose by 5.4% to 9.11 crore.
With the increasing participation of retail investors, DIIs offer a structural and sticky source of liquidity.
This deepens the market, improves price discovery, and ties Indian equities more closely to the country’s underlying economic fundamentals.

Conclusion: A Balanced Future with Dual Forces

The last decade marks a structural transformation in Indian capital markets.

DIIs offer stability, a longer-term view, and a stronger connection to India’s domestic economy.
DIIs deepen market resilience and absorb shocks effectively.
Domestic capital links Indian markets closely to economic fundamentals.
FIIs still bring global capital, expertise, and visibility, but their flows often induce volatility.
The decade’s shift points to a balanced and mature capital market ecosystem.
The rise of DIIs signals a maturing, resilient, and increasingly self-reliant Indian equity market, one that is less hostage to foreign flows and more anchored to domestic economic progress.

This balance between FIIs and DIIs is not just a shift in statistics, but a landmark moment in India’s journey toward becoming a global economic powerhouse.