"We strongly believe that the record DII selling witnessed in 2013 should abate sharply in 2014," Deutsche Bank said in a note.
However, the report said while DII selling has continued in 2014, the pace of this selling has slowed sharply so far this year at around 38 percent as against the same period in 2013.
"For DII flows to turn positive, inflows from insurance companies remain critical, which may turn around early H2 as investors of unit-linked products (Ulips) recognise the strength in market," the report said.
Deutsche Bank said the recent bold measures by the government on food inflation and railway tariff hikes illustrate its resolve to address the country's macro economic imbalances and make economic recovery the cornerstone of its political strategy.
"Raising household savings and re-directing savings from physical to financial assets has thus emerged as a corollary to the government's economic revival strategy," it said.
A sharp decline in both domestic and global gold prices, a government committed to inflation control and vibrant equity markets should see the transition from physical, which is currently at a multi-decade high of 68 percent to financial savings, it added.
According to the report, the national fixation on gold as an investment option is on the wane following declining global prices and expectations of a continuing decline in domestic prices as the government potentially rolls back gold import restrictions following CAD normalisation.