FIIs net sell shares worth Rs 4637 crores, DIIs net buy Rs 6147

Mumbai, July 29, 2025 — Foreign Institutional Investors (FIIs) turned net sellers in the Indian equity market, offloading shares worth ₹4,637 crore on July 29, as global cues, earnings uncertainty, and valuation concerns prompted a retreat. In contrast, Domestic Institutional Investors (DIIs) stepped in with robust buying, pumping in ₹6,147 crore, cushioning the market against deeper losses.

This stark divergence in institutional flows underscores the tug-of-war between global risk aversion and domestic confidence in India’s long-term economic narrative.

Market Recap: Volatility Grips Benchmarks

Equity benchmarks remained volatile through the day, with the Nifty 50 slipping 112 points to close at 24,196, while the Sensex ended 321 points lower at 79,362. Selling pressure was broad-based, particularly in IT, FMCG, and financial stocks, driven largely by FIIs trimming their positions amid global economic uncertainty and rising US bond yields.

"FIIs are clearly wary of rich valuations in the Indian market, especially in the large-cap segment, and are booking profits," said Richa Mehta, Senior Equity Strategist at Edelweiss Wealth. "Meanwhile, DIIs are playing the role of stabilizers, with strong SIP flows and retail participation boosting their firepower."

Global Headwinds Trigger FII Caution

The sharp outflow from FIIs comes against a backdrop of rising global risk aversion. Investor sentiment has been roiled by concerns over the US Fed’s prolonged hawkish stance, a stronger dollar, and signs of a slowdown in China’s economic momentum.

Additionally, geopolitical tensions in the Middle East and uncertainties surrounding the upcoming US elections have prompted foreign funds to adopt a defensive posture, triggering capital flight from emerging markets.

"US Treasury yields hitting near-term highs have made dollar-denominated assets more attractive than emerging market equities," said Ankit Jain, Chief Investment Officer at Mirae Asset India. "India, despite its strong fundamentals, is not immune to these global pull factors."

DIIs Maintain Conviction Amid Earnings Season

On the flip side, domestic institutional investors — including mutual funds, insurance companies, and pension funds — remain net buyers, reflecting their confidence in corporate earnings and macroeconomic resilience.

Strong inflows into equity mutual funds, driven by systematic investment plans (SIPs) and improving household savings, have empowered DIIs to absorb FII selling pressure effectively.

"Retail flows continue to be sticky, and DIIs are leveraging that to invest in select themes like consumption, manufacturing, and infrastructure," said Neeraj Bansal, Fund Manager at Axis Mutual Fund.

Earnings from key index heavyweights have so far painted a mixed picture, with margin pressures evident in consumer sectors, while banks and auto companies have delivered solid performance.

Sectoral Trends: Selective Buying Seen

While FIIs pulled back across the board, certain sectors saw relative resilience thanks to DII interest:

• Banking: Continued to attract interest due to stable earnings and improved credit growth outlook.

• Capital Goods & Infra: Gained traction on the back of government-led capex and order book visibility.

• IT & FMCG: Faced headwinds due to global slowdown concerns and rural demand softness.

"Domestic flows are skewed toward cyclical and domestic-facing themes. We’re seeing FIIs rotate out of defensive and export-oriented names and DIIs step in where valuations have turned favorable," noted Priya Khanna, Market Strategist at Motilal Oswal.

Rupee Movement and Bond Yields

The Indian rupee weakened marginally against the US dollar, ending at ₹83.24, as risk-off sentiment weighed on emerging market currencies. Meanwhile, India’s 10-year benchmark bond yield inched up to 7.14%, tracking global cues.

"Currency stability and real yield advantage have helped limit outflows to some extent, but the pressure may persist if the US dollar continues to strengthen," said Kunal Shah, Currency Analyst at Kotak Securities.

Investor Outlook: Cautious but Optimistic

Despite the FII pullback, analysts remain optimistic about medium-to-long-term prospects for Indian equities, driven by structural reforms, demographic tailwinds, and a robust domestic consumption story.

Short-term volatility, however, cannot be ruled out.

"The near-term trajectory will depend on global macros, earnings commentary, and policy signals from the RBI in the upcoming policy review," said Aditi Rao, Senior Research Analyst at HDFC Securities.

Retail investors are advised to stay diversified, avoid panic selling, and continue with SIPs to benefit from long-term wealth creation.

While FIIs continue to hedge their bets amid global headwinds, DIIs have emerged as the resilient backbone of the Indian equity market. The counterbalancing effect of these institutional flows highlights the growing maturity of India’s capital markets and the increasing influence of domestic savings in shaping market direction.

As uncertainties linger, the focus will remain on quality, earnings stability, and macro fundamentals, making investor discipline and prudence more important than ever.