A Study on the Impact of FIIs and DIIs on the Indian Stock Market

SATHISH KUMAR S.; MUTHAMIZHSELVAN K.

doi:10.64137/31079423/IJEBMR-V2I2P124

Authors

S. SATHISH KUMAR Assistant Professor, Department of Management Studies, E.G.S.Pillay Engineering College, Nagapattinam, Tamil Nadu, India. Author
K. MUTHAMIZHSELVAN Department of Management Studies, E.G.S.Pillay Engineering College, Nagapattinam, Tamil Nadu, India. Author

DOI:

https://doi.org/10.64137/31079423/IJEBMR-V2I2P124

Keywords:

FIIs, DIIs, NIFTY 50, Sensex, Institutional Investment, Stock Market, Market Volatility, SIP Investment, Capital Market

Abstract

Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) play a significant role in influencing the Indian stock market. Institutional investment flows affect market liquidity, volatility, investor confidence, and long-term economic growth. This study examines the impact of FII and DII investment flows on benchmark indices such as NIFTY 50 and BSE Sensex during the period 2020–2025. The study mainly focuses on institutional investment behaviour, market volatility, investor sentiment, and market stability. Secondary data was collected from NSE, BSE, SEBI, RBI reports, financial journals, and market publications. Statistical tools such as percentage analysis, mean, correlation analysis, trend analysis, and chi-square test were used for data analysis and interpretation. The findings reveal that FIIs strongly influence short-term market movements and volatility, whereas DIIs act as long-term stabilizing forces in the Indian stock market. The study also highlights the increasing role of SIP investments and domestic mutual fund participation in strengthening the Indian capital market. The research concludes that the balanced participation of FIIs and DIIs contributes significantly to market resilience, liquidity, and sustainable economic growth. The growing dominance of domestic investors has reduced the dependency of Indian markets on foreign capital and improved overall market stability.

References

[1] R. Bansal, and J. S. Pasricha, “Impact of FII Flows on Indian Stock Market,” Journal of Financial Studies, vol. 6, no. 4, pp. 10–16, 2009.

[2] K. Iyna, “Online-to-Offline (O2O) Models for Modern Retail Businesses,” International Journal of Commerce, Finance and Digital Economy, vol. 1, no. 1, pp. 1-12, 2026.

[3] Sehgal, S., & Tripathi, V. “FII Participation and Stock Price Determination in India,” Asian Economic Review, vol. 12, no. 3, pp. 120–140, 2009.

[4] B. Ramasamy, and M. Yeung, “Determinants of Foreign Institutional Investment in Emerging Markets,” International Journal of Economics and Finance, vol. 8, no. 2, pp. 55–70, 2010.

[5] A. Pandiammal, K. Iyna, “The Causality between FII and BSE in India,” International Journal of Applied Social Science, vol. 6, no. 6, pp. 1357-1361, 2019.

[6] P. Kaur, and S. Dhillon, “Relationship between FII Inflows and Indian Stock Market Indices,” Indian Journal of Finance, vol. 5, no.1, pp. 98–106, 2010.

[7] P. Saxena, and M. Bhadauriya, “Causal Relationship between FII Flows and Stock Returns,” Finance India, vol. 9, no. 3, pp. 65–73, 2011.

[8] S. Kumar, “FII Investments and Market Volatility in India,” Global Business Review, vol. 14, no. 2, pp. 150–162, 2012.

[9] A. Bala, “Role of Institutional Investors in Indian Stock Market Development.” Indian Economic Journal, vol. 11, no. 4, pp. 210–225, 2013.

[10] R. Gupta, and P. Jain, “Comparative Impact of FIIs and DIIs on Stock Market Performance,” Journal of Commerce and Accounting Research, vol. 18, no. 2, pp. 88–101, 2014.

[11] R. Sharma, “Stabilizing Role of DIIs in Indian Stock Market,” Indian Journal of Research in Capital Markets, vol. 22, no. 5, pp. 175–188, 2016.

[12] P. Mohanty, “Institutional Investors, Volatility, and Long-Term Returns.”

a. Journal of Emerging Market Finance, vol. 17, no. 2, pp. 200–218, 2021.

[13] K. Rai, and N.R. Bhanumurthy, “FII Flows and Stock Market Volatility in India,” NSE Research Initiative, vol. 4, no. 2, pp. 90–102, 2004.

[14] R. Chakrabarti, “FII Behaviour and Market Efficiency in India,” ICRA Bulletin, vol. 7, no. 1, pp. 45–59, 2001.

[15] N. India, FII/FPI & DII trading activity in Capital Market segment, NSE India, 2025. https://www.nseindia.com/reports/fii-dii.

[16] “LIVE Stock/Share Market | Indian Stock/Share Market LIVE | BSE SENSEX | BSE (formerly Bombay Stock Exchange),” Bseindia.com, 2026. https://www.bseindia.com/indices/indexarchivedata

[17] “SEBI | Publications,” www.sebi.gov.in. https://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListing=yes&sid=4&ssid=80&smid=101

[18] “RBI Annual Report 2025-26,” Drishti IAS, 2025. https://www.drishtiias.com/daily-updates/daily-news-analysis/rbi-annual-report-2025-26