After investing a record amount in Indian equities in March, domestic institutional investors (DIIs) have started the new financial year on a slower note.
So far in April, DIIs have made net investments of over ₹47,577 crore in equities, compared with nearly ₹1.43 lakh crore in March — the highest ever for a single month. The last time DII investments crossed ₹1 lakh crore was in October 2024, during a period of heavy selling by foreign portfolio investors (FPIs). Since January 2025, DIIs have invested less than ₹50,000 crore in four months.
Valuation Spike
Experts attribute the moderation in investment activity to the market’s recovery from its March lows, which has made valuations relatively more expensive. Investors are also turning cautious amid elevated macroeconomic risks stemming from the ongoing conflict in West Asia.
Valuations have inched up, with the Nifty 50’s price-to-earnings (P/E) ratio rising to nearly 21x in April from around 19x a month ago, though still below the five-year average of 23x. The index has rebounded nearly 6% after declining about 10% in March.
Earnings Scrutiny
Concerns around earnings growth are also weighing on sentiment. “I think DIIs are waiting for earnings results. After that, they may decide where to deploy money,” said Nikita Sony, Investment Manager at ICICI Prudential Asset Management Company.
Heightened geopolitical tensions in West Asia have prompted several global brokerages to downgrade Indian equities, citing risks from volatile crude oil prices, currency fluctuations, and potential pressure on corporate earnings. Nifty 50 earnings growth estimates have been revised down to 10–13% from earlier projections of 15–17% for FY27.
Despite this, DIIs have remained consistent buyers even during the FPI sell-off that began in late September 2024. So far in 2026, DIIs have net purchased equities worth ₹2.51 lakh crore, while FPIs have net sold shares worth ₹1.27 lakh crore.
Although market returns have been muted over the past two years, experts do not foresee selling pressure from DIIs in the near term. “During 2008–2009, there were redemption pressures when markets fell or returns weakened. That hasn’t happened this time,” said George Thomas, Fund Manager at Quantum Asset Management Company.
A key positive, experts note, is the increasing maturity of retail investors. “Retail investors have become more patient and are adopting a long-term approach,” said Deepak Shenoy, CEO of Capitalmind Mutual Fund. “Fifteen years ago, they would exit during downturns.”