NEW DELHI: India’s stock market scene in 2025 is nothing short of dramatic, and honestly, and the year’s emerging trends are fascinating.
While foreign institutional investors (FIIs) have hit the exit like never before, the markets haven’t slumped as one might expect. Instead, they’ve demonstrated remarkable resilience—and it’s the homegrown players who are stepping up.
FII outflows in India’s secondary markets have smashed previous records. By the middle of August 2025, foreign investors have net sold over Rs1.5 lakh crore in the secondary market—making this year the worst on record in terms of foreign exodus.
The reasons aren’t mysterious: slowing earnings growth, premium valuations at home, and a slew of global uncertainties are pushing portfolio managers toward cheaper shores like the US, Europe, and China. In this climate, India’s market just doesn’t seem as irresistible for outsiders as it did in the boom years.
Domestic investors: The market’s secret weapon
But here’s the plot twist. Despite these massive outflows, Indian equities are holding their ground—thanks largely to domestic institutional investors (DIIs) and millions of retail investors. DIIs have ramped up their game in 2025, pouring a colossal Rs4 lakh crore into equities in just seven months.
To put it in perspective, this is not just the biggest cash-market inflow since 2007 for DIIs—it already amounts to over 80% of last year’s total inflows. When you measure it against the average Nifty market capitalisation, these DII inflows represent 2.2%—the highest share in nearly two decades.
That’s up handsomely from 1.4% last year and absolutely dwarfs the 0.6% seen in 2023.
Retail army stays the course
Retail investors, it seems, are undeterred by global jitters. In July alone, they entrusted a record Rs427 billion ($4.9 billion) into equity mutual funds. Even as FIIs yanked out $3 billion that month, the local crowd rushed in, cushioning the impact of capital flight.
So why exactly are the foreigners bailing? Apart from the tepid domestic earnings and high valuations, the world’s looking for bargains elsewhere, and India’s market is no longer the default darling.
Add to that the renewed trade anxieties, uncertainty over US-India agreements, and a complicated geopolitical mix. Not to mention, global managers are shifting from their usual “buy-and-hold” tactics to more nimble, tactical moves.
Right now, there’s anticipation building around US President Donald Trump’s meeting with Russian President Vladimir Putin on August 15.
Domestic investors are keenly watching for any signals that may ease tariff disputes and bring fresh clarity to the global investing landscape.
Looking forward—Who moves the market?
With the FII tide receding at a record pace, it’s the force of India’s own institutions and the everyday investor that’s keeping the market buoyant. Their combined conviction in Indian growth seems to outweigh the gloom cast by global bearers.
If geopolitical tempests settle—and valuations come down a notch—FIIs might just rediscover their appetite for India. Until then, the market remains, quite unapologetically, in Indian hands.
