INDIAN EQUITY FLOWS: FII WITHDRAWALS VS. DII MARKET SUPPORT

Abstract This study explores the dual impact of Foreign Institutional Investor (FII) flows and Domestic Institutional Investor (DII) activity on the Indian equity market, with a particular focus on the NIFTY50 index from 2015 to 2025. FIIs, guided by global macroeconomic conditions, often move large volumes of capital in and out of the market. Their withdrawals are typically associated with heightened volatility, declines in market indices, and depreciation of the Indian rupee. In contrast, DIIs comprising domestic mutual funds, insurance companies, and pension funds have emerged as crucial stabilizers, absorbing selling pressure from FIIs and mitigating its adverse effects. The research adopts a descriptive and analytical design, using secondary data from NSE/BSE and SEBI reports. Pearson’s correlation and regression methods are employed to examine the relationship between institutional flows and index performance. Results reveal that FII withdrawals show a weak and statistically insignificant impact on the NIFTY50 in the long run. However, DII inflows display a strong positive association with index stability, particularly visible during highoutflow years such as 2022, 2024, and 2025. For instance, record DII buying during sharp FII exits limited drawdowns and supported quick recoveries, underscoring their growing market influence. The study concludes that sustained DII participation has reduced Indian markets’ dependence on foreign capital and strengthened resilience during global shocks. Policymakers should continue to encourage the expansion of domestic capital pools, foster retail participation, and maintain a supportive regulatory environment to ensure longterm market stability.