Foreign institutional investors (FIIs) have emerged as net buyers in Indian equities over the past nine trading sessions, acquiring over $2 billion worth of shares, fueling a market upswing. On February 9 alone, they purchased shares valued at Rs 2,223 crore based on exchange data. Experts, however, advise caution in assessing the sustainability of this trend in the medium term, suggesting that it hinges on trade stability, improved corporate earnings, and a weakening dollar.
Domestic institutional investors (DIIs) have also been active participants, buying equities exceeding Rs 8,973 crore during the same period. The fact that DIIs hold a larger portion than FIIs in the Nifty50 index highlights a notable shift towards increased domestic involvement in India’s equity markets. This shift underscores the growing influence of domestic capital pools, driven by consistent mutual fund SIP inflows, rising retail engagement, and steady investments from insurance and pension funds, while FIIs exercise prudence amidst global uncertainties.
The dominance of domestic funds signifies a more stable and enduring source of liquidity, reducing dependence on volatile foreign investments. This trend could potentially shield markets during global risk aversion phases, ultimately fortifying India’s equity market structure and aligning it with domestic growth fundamentals, as stated by Himanshu Srivastava, Principal, Manager Research at Morningstar Investment Research India.
Renewed foreign interest follows a recent market correction that enhanced valuations compared to other Asian markets. Additionally, the India–US trade deal framework has alleviated uncertainties, stabilized bond yields, and boosted risk appetite. Benchmark indices such as Sensex and Nifty witnessed over 3% growth, while BSE MidCap 150 and BSE SmallCap 250 surged approximately 5.66% and 6.3%, respectively, during this rally.
Market participants attribute this positive momentum to the Reserve Bank of India’s accommodative stance, improving GDP figures, a robust earnings outlook, and steady domestic investments, factors that could potentially attract more foreign inflows. A recent report by Motilal Oswal Securities revealed that as of the December 2025 quarter, domestic institutions held about 24.8% of Nifty50, slightly surpassing foreign investors at around 24.3%. Analysts note that FII ownership hit an eight-quarter low, indicating a structural shift towards domestic capitalization rather than a cyclical trend.
