Foreign investors remain bearish on Indian equities, while domestic institutional investors (DIIs) stay bullish on Dalal Street. DII net buying has crossed Rs 4 lakh crore in just over five months of 2026.
DIIs have net bought shares worth more than Rs 4.16 lakh crore so far in 2026, while FIIs have net sold Indian equities worth Rs 2.7 lakh crore.
Domestic institutional investors purchased Indian equities worth Rs 39,098 crore so far this month. At the same time, foreign investors net sold Indian equities worth nearly 35,445 at the same time. This trend has repeated over the previous months as well.
In January, markets were more or less stable, with Nifty soaring to fresh lifetime highs early in the month, with investors unaware of what was coming next. DII net bought Indian equities worth Rs 69,221 crore during the month.
In February, AI worries clouded sentiment for heavyweight IT stocks which saw a massive crash. Innovations by Anthropic spooked investors about the possibility of AI-led disruption in India’s much-touted IT sector. Despite worries, DIIs remained bullish on Indian markets and net bought shares worth Rs 38,423 crore.
The Iran-US war grabbed the headlines in March, rattling global markets. While the bulls and bears of Dalal Street were fast asleep late during the last weekend of February, US and Israel conducted targeted military strikes on Iran, killing its supreme leader, Ayatollah Ali Khamenei. What followed was a series of retaliatory attacks by Iran across major areas of the Middle East, leading to widespread hostilities in the oil-rich area of the Middle East.
When markets reopened in March, a sharp bloodbath wiped off massive sums of investor wealth as bears reigned over. Soaring crude oil prices, rising hostilities, soaring bond yields, weakening rupee and other factors spooked investors, leading to Nifty crashing 11% over March. FIIs unleashed an unprecedented retreat from Dalal Street, selling shares worth nearly Rs 1.2 lakh crore. Yet, DIIs maintained their calm.
Amid these uncertainties, DIIs net bought shares worth nearly Rs 1.36 lakh crore in March, the sharpest purchases recorded by the domestic institutional investors in any month so far this year.
The following months saw heightened volatility amid the sea-saw political game in the Middle East. US President Donald Trump’s constant threats, a fragile ceasefire, Pakistan’s futile peace talk attempts and other developments kept investors on the edge. In this storm, DIIs continue to remain calm. DIIs net bought Indian equities worth Rs 51,064 crore in April and Rs 82,669 crore in May.
What are DIIs seeing?
DIIs, which include mutual funds, insurers, pension vehicles and treasuries, remain net buyers on Dalal Street, although their quantum of net purchases have reduced from last year. For example, DII net bought shares worth Rs 79,620 crore in December, Rs 77,084 crore in November and Rs 52,794 crore in September, even while FIIs overall remained net sellers.
Two years of muted market returns often prompt retail investors to reassess exposure to the stock market. Monthly mutual fund SIP inflows declined to Rs 31,115 crore in April compared to a record high of Rs 32,087 crore seen in March. On a yearly basis however, the monthly SIP inflows rose by 18% from Rs 26,400 crore in April 2025.
Dhiraj Relli, MD and CEO of HDFC Securities, noted that the Nifty is currently trading at close to a 10% discount to its long-period average, an unusual condition for a market that routinely commands premium multiples. "Valuations are closer to long-term averages, particularly within large-cap stocks, while earnings growth is expected to accelerate in the second half of FY27," Relli said. "Hence any near-term volatility should be viewed as an opportunity to increase equity exposure. I continue to believe that the Nifty could hit a new all-time high later this year once uncertainty around the US-Iran conflict starts abating."
Vikas Khemani, Founder of Carnelian Asset Management, meanwhile explained that this is not a moment to reduce their India exposure. "It is a moment to recognize that India's structural re-rating is in front of us, not behind us," he said.
Where are Indian stock markets headed at?
After the sharp correction, Nomura sees Nifty rising to 25,900 by March 2027. The international brokerage in its latest ‘India Equity Strategy’ report said that it has raised its Nifty target from its earlier 24,900 estimate for December 2026. It highlighted that despite the downturn since the onset of the US-Iran war, Dalal Street has performed better than it had fallen during the beginning of the Russia-Ukraine war in 2022.
The optimism this time, according to Nomura, is being driven by expectations that the West Asia conflict will end and that the strait of Hormuz will open up, driving oil prices lower, a very strong AI theme and supportive central banks. "In absolute terms, Indian equities have also held well, though they have underperformed many global indices. Nifty is down 10% since the start of the conflict, a fall lower than that witnessed in 2022. However, the broader market reflected in Nifty mid- and small-cap indices recorded positive returns during this conflict. FIIs sustained intense selling on concerns of a cyclical impact from higher oil prices, the structural impact of AI and no material correction in valuations," the international brokerage further said.
Also read: Nifty at 25,900 by March 2027? Nomura cites key catalysts to watch out for
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
