Foreign Exodus Meets Domestic Resilience: Indian Markets Witness Record DII Support Amid Chaos

Indian equity markets experienced a sharp reversal on Monday, April 7, 2025, when foreign institutional investors (FIIs) net sold ₹90.40 billion ($1.05 billion) worth of shares, a reflection of increased global uncertainty and risk aversion. This is a continuation of the long-term FII outflows that have beset Indian markets this year. Global market volatility was added to the sell-off as increasing trade tensions between the US and China created widespread volatility.

Despite the foreign exit, the domestic institutional investors (DIIs) stepped in, infusing ₹121.22 billion into Indian equities—their largest one-day inflow since February 28, 2025. The robust DII action is a testament to their growing role in insulating the market from external shocks.

The benchmark indices also suffered the brunt of the sell-off, with the BSE Sensex falling 3,939 points (5.22%) to the day's low of 71,425 and the NSE Nifty50 falling 1,160 points (5.06%) to 21,743—the worst single-day fall in nearly a year. The broader market also lost heavily, with mid-cap and small-cap indices losing 7.5% and 9.92%, respectively.

Market experts attribute the sharp decline to worldwide trade tensions driven by China's retaliatory tariffs on US goods and overall fear of economic growth slowing in the world. The volatility index (India VIX) surged by nearly 60%, indicating growing investor anxiety.

As FIIs continue to take their exit from Indian equities to other emerging markets such as China, DIIs are holding on tight, using domestic consumption themes to balance out the outflows. Experts, however, warn that if foreign withdrawals persist, they would undermine market recovery in the short term.

Source: Reuters, NSE India