DII flows into equity hit 10-month low in February

In February 2025, domestic institutional investors (DIIs) in India recorded their lowest equity inflow in ten months, with purchases totaling ₹26,130.3 crore, marking a significant decline from the average of recent months. This downturn can be attributed to lackluster market performance over the past 15 months, particularly in mid- and small-cap stocks, which have seen substantial volatility and declines. Investors are increasingly shifting their focus towards precious metals, with mutual funds reportedly doubling their allocations to gold and silver, leading to higher inflows in these asset classes than in equity funds for the first time. Analysts note that the Indian equity market has delivered tepid returns, causing a reduction in DII participation as they reassess their strategies in light of market conditions. Despite this, foreign investors have shown a contrasting trend, turning buyers with inflows exceeding ₹895.6 crore in February. The shift in investment patterns raises questions about the future of domestic equity flows, as market performance heavily influences liquidity and investor sentiment. With uncertainties lingering, it remains to be seen whether this decline in DII flows is a temporary pause or a sign of a more enduring trend in the Indian equity market.