Shifting Dynamics of Equity Market

The rise of DIIs as dominant shareholders in equity market captures a structural change, but FPIs matter

- SUNDAR SETHURAMAN & SAMIE MODAK

In a significant shift, domestic institutional investors (DIIs), primarily mutual funds and insurance companies, have surpassed foreign portfolio investors (FPIs) as dominant shareholders in India's equity market.

According to Prime Database, DIIs held a 17.62 per cent stake in companies listed on the National Stock Exchange (NSE), edging out FPIs at 17.22 per cent, as of March 2025. This is the first time DIIs have overtaken FPIs since tracking began in 2009, with the value of DII holdings reaching ₹71.76 trillion, 2 per cent higher than that of FPIs.

A decade ago, FPIs dominated with a lead of over 10 percentage points. DII holdings were worth half of FPIs' at that point.

This transformation signals a structural change in India's capital markets, driven by a surge in domestic retail participation—both via direct equity investing and through the mutual fund systematic investment plan (SIP) route. But what does this mean for markets, how does it compare globally, and do FPIs still matter?

A more resilient market

The rise of DIIs as the largest non-promoter shareholder category has fundamentally altered the dynamics of India's equity markets. "Indians are putting money in equities—something that they never used to earlier... Because of that, DIIs are getting money, and they are investing," says Jyotivardhan Jaipuria, founder and managing director of Valentis Advisors. This influx, fuelled by retail investors channelling savings into mutual funds via SIPs (systematic investment plans), has made domestic money a stabilising force. Unlike FPIs, whose capital flows are often volatile, domestic funds are "stickier," as Jaipuria notes, remaining invested through market cycles.

This stability was evident in recent months. "In the last six months, FPIs have sold quite a lot in the market, but the market fall was not very sharp, unlike in 2008," Jaipuria explains.