DIIs likely to buy aggressively on market declines, say analysts

On Monday, FIIs sold equities worth ₹9,040.01 crore, while DIIs bought stocks worth ₹12,122.45 crore, the second-biggest single-day buying this year

Since the start of the stock market downturn in October, domestic institutional investors have bought stocks worth ₹3.9 trillion while global funds sold stocks worth ₹3.41 trillion, according to data compiled by Business Standard. With bearish pressures returning to Dalal Street after a short-lived rebound, analysts believe local funds could turn even more aggressive as their global counterparts resume selling.

 

On Monday, when the benchmark indices saw their worst day since June 4 last year, foreign institutional investors (FIIs) sold equities worth ₹9,040.01 crore, while DIIs bought stocks worth ₹12,122.45 crore, the second-biggest single-day buying this year. 

 

Global funds have remained net sellers since October 2024, driven by concerns over stretched valuations and a looming global growth slowdown. Additionally, China's stimulus efforts to revive its economy and tariff threats from US President Donald Trump have further influenced their investment decisions related to Indian equities. After recouping from the losses triggered by the global exodus, India’s benchmark indices faced renewed uncertainty as Trump’s tariff measures rattled global markets. 

 

 

In the past six months, foreign institutional investors have significantly sold off in Indian markets. However, this has not had a major impact, thanks to strong domestic participation, according to Chirag Muni, Executive Director at Anand Rathi Wealth. DIIs will likely “go harder” on their buy-on-dips, as we have seen in the past, he said. “Currently, mutual funds are holding cash reserves of ₹1.87 trillion, which will likely support further buy-on-dips,” Muni said.

 

He added that he does not expect any slowdown in systematic investment plans (SIPs) despite recent market corrections. “SIP inflows and continued retail participation are expected to help maintain mutual funds' cash positions,” he said. Muni also believes that FII selling has already peaked and anticipates a return of FII inflows in the near future. “Indian markets are currently trading at attractive valuations, supported by strong macroeconomic fundamentals. After five months of continuous outflows, March 2025 saw FII flows turning positive,” he added.

 

Over the past six to seven weeks, markets have declined from their recent highs. While there were brief signs of recovery, they failed to sustain amid persistent concerns over global economic stress, according to market experts. 

 

FIIs have continued to offload Indian equities over the past five to six months. Chandan Taparia, head of technical and derivatives research at Motilal Oswal noted that despite some intermittent buying in the last two weeks, they have largely remained net sellers—reducing delivery-based investments and creating short positions. “In contrast, DIIs have consistently bought into the market.”  

 

Taparia added that this domestic buying has been supported by steady inflows through SIPs and a sharp increase in demat account openings. Additionally, many quality stocks are trading 10–30 per cent below their lifetime highs, prompting fund managers, smart investors, and even new participants to enter for bargain buying, he said. Taparia believes that DIIs will buy aggressively on any corrective move, viewing every decline as a buying opportunity.

 

Meanwhile, retail investors net-sold stocks worth ₹9,824 crore in March, the first monthly selling since September last year, according to NSE data.

 

Analysts also warn that domestic funds will not go all out as they also await how the tariffs will pan out. DIIs are unlikely to rush in as there is heightened uncertainty, and no one knows how this crisis will evolve, according to VK Vijayakumar, chief investment strategist at Geojit Investments Ltd. If the uncertainty and market corrections persist, SIPs are likely to slow down, he said. Investors should be in a wait-and-watch mode and can start nibbling at high-quality domestic consumption themes, Vijayakumar added.