Will foreign investors return to Indian markets in 2025?
Subscribe to enjoy similar stories. MUMBAI : While FIIs gave India the cold shoulder in 2024, DIIs demonstrated remarkable resilience, maintaining strong inflows. In October, when Indian markets saw the largest foreign institutional investor (FII) sell-off of the year at ₹91,933.64 crore, domestic institutional investors (DIIs) stepped in with the highest monthly net purchases of ₹105,253.33 crore.
In fact, 2024 was the fourth consecutive year when DIIs poured more money into markets than FIIs, showed a 2JanuaryIIFL Securities report. Though FIIs returned as net buyers in December, it may be too soon to assume that the trend will continue throughout 2025. “The significant FII selling in the last quarter of 2024 suggests caution, likely driven by a mix of global macroeconomic factors and domestic concerns," according to the research team of Bajaj Broking (Bajaj Financial Securities).
The continuation of this trend in 2025 will largely depend on how the global economy performs, the actions taken by the Indian government and the Reserve Bank of India (RBI), and corporate earnings. If global interest rates remain high or inflationary pressures persist, FIIs might continue to favour developed markets, it added. “However, we believe India’s growth story will regain momentum, and the coming budget will focus on growth.
Hence, FIIs will look to re-enter Indian equities in the coming months." Meanwhile, robust SIP inflows and strong retail participation in broader markets are bolstering DIIs' resilience, as evidenced by the steady rise in demat account openings. “Notably, mutual funds contributed to approximately 80% of net flows by DIIs in 2024 on a CYTD basis. While the ownership of Indian households in equities has increased,
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