The ongoing tug of war between Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) continues to create opportunities for retail investors. According to reports from Mint, when FIIs sold ₹94,017 crore net in October 2024, the Nifty corrected ~6% in a single month - yet corporate earnings trajectories of private banks and tier-one IT companies did not change. P Krishnan, Managing Director & Chief Investment Officer at Spark Asia Impact Managers, notes that while FIIs have choice to stay out of Indian equities, DIIs have very little wiggle room when they see inflows in this asset class, creating predictable patterns for informed positioning opportunities.
FIIs are likely to continue focusing on domestic demand-driven sectors such as financials, infrastructure, and select healthcare and consumer-facing names. As reported by Mint, financials have always been well-held by FIIs due to good free float and ample liquidity, though selling has been seen precisely for this reason. On the contrary, IT services and traditional consumer sectors are clear avoids for FIIs due to structural challenges and high free float. Experts suggest retail investors should focus on sectors where FPIs have limited exposure, including metals, infrastructure, auto, defence, railways, AI, and chemicals, where any good news will bring in FPI flows and create value for retail investors.
The data proves that SIP investors benefit significantly from FII volatility through systematic cost-averaging. According to Choice Mutual Fund data compiled by Mint, total SIP inflows grew from ₹1.84 lakh crore in CY2023 to ₹2.68 lakh crore in CY2024 to ₹3.34 lakh crore in CY2025. Manish Jain, Deputy CEO at Choice Mutual Fund, explains that the SIP investor involuntarily benefits from FII volatility - every dip deepens the cost-averaging advantage, with DII-supported floors enabling recovery. The strategy involves turning volatility into entry discipline through STP/SIP into weakness rather than trying to time bottoms.
Experts advise a measured approach for retail investors navigating the FII-DII tussle. As reported by Mint, Kishor P Ostwal, CMD at CNI Infoexchange, recommends focusing on earnings as earnings are the priority for markets, with many companies available at PE less than 8. The strategy involves rebalancing through broad index purchases and staggered buys instead of concentrated punts, maintaining a stabiliser sleeve for buying dips without forced selling. However, Krishnan warns that it does not make sense for retail investors to play a contrarian strategy in these areas right now, as there is a possible reset of great proportion unfolding.