Foreign portfolio investors extended their selling streak in Indian equities, while domestic institutions once again emerged as the stabilising force for the market. On Monday, December 15, FIIs were net sellers to the tune of ₹1,468 crore, according to provisional exchange data, while Domestic Institutional Investors absorbed the supply with net purchases of ₹1,792 crore. The divergence highlights the growing role of domestic capital in counterbalancing global risk aversion.

The FII–DII split has become a defining feature of Indian markets in 2025. Foreign investors have remained cautious amid global macro uncertainty, a strong US dollar, and concerns around emerging market capital flows. At the same time, domestic flows - driven by mutual funds, insurance companies, and retirement savings - have grown steadily, altering the market’s dependence on foreign capital.

For the current month alone, FIIs have sold Indian equities worth ₹21,074 crore. In sharp contrast, DIIs have not only offset this outflow but exceeded it significantly, with cumulative net buying of ₹41,762 crore so far in the month. On a year-to-date basis, the divergence is even starker: FIIs have offloaded equities worth ₹2.93 lakh crore, while DIIs have deployed a record ₹7.5 lakh crore the highest annual domestic inflow seen so far.

Monday’s trading data shows that FIIs bought shares worth ₹8,610 crore but sold a higher ₹10,078 crore, resulting in net selling. DIIs, on the other hand, recorded gross purchases of ₹11,749 crore against sales of ₹9,957 crore. This pattern underscores selective accumulation by domestic investors rather than indiscriminate buying.

Market indices reflected this cautious balance. After two sessions of gains, benchmarks closed marginally lower. The BSE Sensex slipped 54 points to end at 85,213, while the Nifty 50 declined 20 points to 26,027. Broader markets painted a mixed picture, with the Nifty Midcap index down 0.12 percent, while the Nifty Smallcap 100 edged up 0.2 percent suggesting stock-specific action rather than broad-based risk-taking.

Commenting on market conditions, Vinod Nair, Head of Research at Geojit Investments, noted that continued foreign fund outflows and a weak rupee have kept markets range-bound. He added that currency volatility is likely to persist until there is greater clarity on the India–US trade deal, a key external variable for capital flows.

Nair pointed out that expectations of an earnings recovery in the second half of FY26—supported by both monetary and fiscal growth drivers are helping stabilise sentiment. According to him, the next phase of market momentum is likely to be earnings-led rather than valuation-driven, a signal that stock selection will matter more than index-level expansion.

Siddhartha Khemka, Head of Research Wealth Management at Motilal Oswal Financial Services, echoed the cautious tone, suggesting that markets may remain in a consolidation phase in the near term. He flagged heightened volatility in the broader market as year-end approaches, driven by thin volumes and an uncertain global macroeconomic backdrop.

Globally, investors are awaiting key US economic data, including non-farm payrolls, retail sales, the unemployment rate, and manufacturing PMI, which could influence expectations around growth and monetary policy. These data points are particularly relevant for emerging markets like India, given their impact on global liquidity and the dollar.

Currency movements added another layer of pressure. The Indian rupee touched a fresh all-time low of 90.79 against the US dollar, marking the third consecutive session of record weakness, before closing at 90.72 down 0.2 percent. A weaker rupee tends to amplify FII caution, even as it offers selective support to export-oriented sectors.

For Indian markets, the current setup suggests resilience rather than momentum. Domestic flows are providing a strong base, but upside may remain capped until foreign selling moderates and currency stability improves.