Despite sustained foreign investor selling, the Indian stock market has remained stable thanks to robust inflows from domestic institutional investors (DIIs). According to Jefferies’ Global Head of Equity Strategy, Christopher Wood, without this steady support, Indian equities could have seen a 20–30% correction.
DIIs have been net buyers for 25 consecutive months through August 2025. In just the first five months of FY26, mutual funds recorded record inflows of $37.6 billion. By contrast, foreign institutional investors (FIIs) have sold a net $1.5 billion year-to-date, with $6 billion of outflows in July and August alone.
While FIIs are currently shifting focus toward markets like Korea and Taiwan, Wood expects India to regain traction once trade tensions with the US ease. Even if tariffs remain, he believes FIIs will return as net buyers by year-end. With high nominal GDP growth, recent tax and GST reforms, and income tax relief, India’s corporate earnings outlook remains strong. Mutual fund inflows, backed by domestic investor confidence, continue to serve as the backbone of the market.