India equity markets resilient in May 2026 as domestic investors offset FII exodus
Synopsis
For the eleventh straight month, foreign investors sold Indian equities — and for the eleventh straight month, domestic investors absorbed every rupee and more. With DII ownership at a record 18.9% and FII ownership at a 14-year low of 14.7%, India's market structure has quietly undergone a tectonic shift that most global headlines missed.
Key Takeaways
Nifty Midcap 150 gained 2.60% and Nifty Smallcap 250 rose 1.56% in May 2026 , even as Nifty 50 dipped 1.87% .
FIIs were net sellers for the eleventh consecutive month , withdrawing approximately ₹55,963 crore in May.
DIIs invested ₹82,668 crore in May; cumulative 2026 DII purchases have crossed ₹4.16 lakh crore .
Domestic ownership of Indian equities hit a record 18.9% ; FII ownership fell to 14.7% , the lowest since June 2012 .
The RBI held the repo rate at 5.25% — the third consecutive pause after 125 bps of cuts since February 2025.
Nifty valuations are now nearly 11% below their five-year average, according to the PL Asset Management report.
India's equity markets held firm in May 2026 despite one of the most hostile external environments in recent memory, buoyed by surging domestic institutional inflows, broad-based corporate earnings growth, and stable macroeconomic fundamentals, according to a report by PL Asset Management released on Wednesday, 24 June 2026.
Two Worlds, One Market
The PL Asset Management report highlighted a striking divergence in global market dynamics during May. Investors in developed economies funnelled capital into artificial intelligence and semiconductor-driven stocks across the United States, South Korea, and Taiwan, while India simultaneously absorbed a trio of external shocks: a surge in crude oil prices, currency weakness, and elevated wholesale inflation.
Yet Indian equities did not buckle. The Nifty Midcap 150 gained 2.60% and the Nifty Smallcap 250 advanced 1.56% during the month. Even the benchmark Nifty 50, which slipped 1.87%, held its ground relative to the scale of external pressure.
Domestic Investors Step Up
Foreign institutional investors (FIIs) remained net sellers for the eleventh consecutive month, pulling approximately ₹55,963 crore out of Indian markets in May. Domestic institutional investors (DIIs), however, countered decisively, deploying ₹82,668 crore — fully neutralising foreign outflows and then some.
Cumulative DII purchases in calendar year 2026 have now crossed ₹4.16 lakh crore, a figure that underscores the structural shift underway. Domestic ownership of Indian equities has climbed to a record 18.9%, while FII ownership has fallen to 14.7% — its lowest level since June 2012. The report characterises this as a structural transformation, with domestic investors emerging as a reliable stabilising force during episodes of global uncertainty.
RBI Holds, Valuations Correct
The Reserve Bank of India (RBI) held the repo rate steady at 5.25% at its June policy meeting, marking the third consecutive pause after cumulative rate cuts of 125 basis points since February 2025. The rate hold signals a watchful stance as global volatility persists.
On valuations, the report noted that benchmark Nifty multiples have corrected to nearly 11% below their five-year average, creating what it described as one of the most attractive entry points in recent years for long-term investors.
What Fund Managers Are Watching
Siddharth Vora, Fund Manager and Head of Asset Management at PL Capital, observed that global market leadership has grown increasingly concentrated in AI and semiconductor-related stocks, particularly across South Korea, Taiwan, and the United States. This concentration, he noted, leaves India as a distinct narrative — one driven more by domestic consumption and earnings than by the global tech cycle.
With FII flows still negative and global macro uncertainty unresolved, the durability of domestic investor support will be the central variable to watch in the months ahead.
Point of View
A reversal that would have seemed implausible a decade ago. This is not a temporary flow story — it reflects the deepening of SIP culture and the institutionalisation of retail savings. The risk, however, is complacency: if domestic flows are now the primary price-setter, market corrections may become shallower but also slower to signal genuine fundamental stress, distorting the price-discovery function that foreign capital once provided.
NationPress
24 Jun 2026
Frequently Asked Questions
How did Indian equity markets perform in May 2026?
Indian equity markets showed resilience in May 2026, with the Nifty Midcap 150 gaining 2.60% and the Nifty Smallcap 250 advancing 1.56%, even as the benchmark Nifty 50 declined 1.87%. Strong domestic institutional buying offset significant foreign outflows during the month.
How much did domestic and foreign investors buy or sell in May 2026?
Foreign institutional investors withdrew approximately ₹55,963 crore from Indian markets in May 2026 — their eleventh consecutive month of net selling. Domestic institutional investors countered with ₹82,668 crore in purchases, more than fully offsetting the foreign outflows.
What is the current domestic versus foreign ownership of Indian equities?
Domestic institutional ownership of Indian equities has risen to a record 18.9%, while foreign institutional ownership has fallen to 14.7% — the lowest level since June 2012, according to the PL Asset Management report.
What did the RBI decide on interest rates at its June 2026 meeting?
The Reserve Bank of India held the repo rate unchanged at 5.25% at its June 2026 policy meeting, marking the third consecutive pause following cumulative rate cuts of 125 basis points since February 2025.
Are Indian stock valuations attractive right now?
According to the PL Asset Management report, Nifty valuations have corrected to nearly 11% below their five-year average as of June 2026, which the report describes as one of the most attractive entry points in recent years for long-term investors.
