The Indian stock market in 2025 has witnessed heavy and persistent selling by Foreign Institutional Investors (FIIs). From the beginning of the year, continuous FII outflows created pressure in the market, keeping investors cautious.
Most months of 2025 ended with net selling. However, in the second week of October, this trend saw a major reversal. After months of being net sellers, FIIs suddenly turned aggressive buyers.
Let’s understand the reasons behind FIIs’ return and explore what this means for investors and the market.
What’s Happening?
October began with the same selling trend, as FIIs recorded net sales of Rs 1,605.20 crore on October 1 and Rs 1,583.40 crore on October 3 in the cash market. On the first trading day of the week starting October 6, selling continued at Rs 313.80 crore. However, what followed was a surprising turnaround. From October 7 onwards, FIIs completely reversed their strategy and started aggressive buying. Between October 7 and 10, they made total net purchases worth Rs 3,289.4 crore.
On the other hand, Domestic Institutional Investors (DIIs) have played a crucial role in stabilising the market. Despite consistent FII selling, DIIs continued their buying spree. In October alone, up to October 13, DIIs purchased Rs 14,130.5 crore worth of equities, reflecting strong domestic fund confidence in the Indian market.
Read FIIs vs DIIs: How India’s Market Ownership Is Changing
Key Reasons Behind This Shift
According to News18, V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, stated that the change in FPI strategy is driven by two main factors. First, the valuation gap between Indian equities and global markets, which was previously wide, has now narrowed. Second, India’s growth and earnings prospects have been revised upward.
Vijayakumar added that GST cuts and a low-interest-rate environment are expected to boost Indian companies’ earnings by FY27, and the market may start factoring this in soon. This shift reflects an improvement in foreign investor sentiment towards Indian equities.
DIIs’ Importance in the Indian Market
Another crucial aspect of this story that cannot be overlooked is the role of Domestic Institutional Investors (DIIs). While FIIs had been consistently selling for months, DIIs acted as a stabilising force in the market. They generally maintained a supportive stance and absorbed a large portion of the foreign sell-off.
For instance, when FIIs sold Rs 1,605.20 crore and Rs 1,583.40 crore worth of equities on October 1 and 3 respectively, DIIs provided crucial support by purchasing Rs 2,916.10 crore and Rs 489.80 crore worth of stocks on those days.
Similarly, on October 6, when FIIs sold Rs 313.80 crore, DIIs made strong purchases worth Rs 5,036.40 crore. This consistent support from DIIs helped the market avoid a major correction that could have resulted from FIIs’ massive Rs 1,53,867 crore outflow in 2025.
What Does It Mean for Investors?
For retail investors, the return of FIIs is a positive sign. FII activity is often viewed as a barometer of international confidence in a country’s economic prospects. If this buying trend continues, it could further strengthen the market’s momentum.
Looking at the trend, FIIs were net sellers during the first three months of 2025, while the Nifty remained largely range-bound. Between April and June, they turned net buyers, and the Nifty surged from around 23,500 to 25,500, a 2,000-point rally that clearly highlights the influence of FIIs on Indian markets. However, since July, FIIs have resumed selling, and the Nifty has struggled to stay above the 25,500 mark.
What’s Next?
The biggest question in the market right now is whether the current buying spree by FIIs will continue. The answer, however, depends on the strength of the Indian economy.
Despite global recessionary concerns, the Indian government appears fully committed to driving economic growth. According to Motilal Oswal, recent trade agreements and corporate earnings results will play a crucial role in shaping market direction. It is expected that Nifty companies’ profits will continue to grow at a strong double-digit pace through FY27. A stable economic environment, policy continuity, and robust corporate earnings are likely to remain the key forces sustaining this positive momentum.
*The article is for information purposes only. This is not investment advice.
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