DIIs give Rs 7 lakh crore support to stock market in 2025; what's ahead?

Domestic institutional investors (DIIs), including mutual funds, insurance companies and financial institutions, bought nearly Rs 7 lakh crore worth of domestic equities so far in 2025, NSE data compiled by AceEquity showed. DIIs infused a net Rs 6,96,277 crore into stocks this calendar year. November’s DII inflows of Rs 77,083 crore or $8.7 billion in dollar terms, in fact, marked their 28th consecutive month of net buying.

BofA Securities expects a steady rise in DII inflows over the next several years. This, it believes could provide valuation support, with Nifty likely to continue trading at 21.5 times earnings per share. 

“For CY26, we conservatively assumed DII flows would grow in line with nominal GDP at 9 per cent year-on-year. With increased governmental focus on consumers, we see several events — a) direct tax cuts (FY26), b) labour reforms (FY26–29E), and c) pay commission hikes (FY28) — potentially pushing disposable income and savings higher,” it said.

DII inflows in 2025, which averaged $5–6 billion per month, were offset partially by primary fund-raises and likely muted FII outflows. BofA Securities estimated $46 billion of liquidity in the secondary market next year.

The share of mutual funds and equities in household financial assets nearly doubled to 15 per cent in FY25 from 8 per cent in FY24, though it still remains significantly below the 30 per cent-plus levels seen in other emerging and developed markets.

Strong domestic inflows and buoyant capital markets drove a structural shift in ownership, with DII holdings surpassing FII holdings in Nifty-500 companies for the first time in the March quarter and rising further in the September quarter, MOFSL noted.

Equirus said the market benefits from structural stability due to robust domestic flows, with strong SIP inflows sustaining at a 27 per cent CAGR. It said DII ownership has risen to 18.6 per cent, structurally absorbing FII selling, whose ownership has slipped to 16.9 per cent. 

"Within EM, South Korea, Taiwan outperformed as FIIs chased AI trades. India notably doesn’t have many direct/indirect play resulting into underperformance," it said.

Nomura noted that investor positioning remained light, with both EM and Asian long-only equity funds underweight after significant selling of India equities. “Overall, we continued to view India as a large, liquid market with a number of high-quality stocks,” it said.

BofA Securities said any further valuation re-rating appears unlikely, while suggesting a 2026 year-end Nifty target of 29,000.