Mutual Funds Lead Equity Inflows as DIIs Maintain Strong Momentum in June

June 19, 2025: Domestic Institutional Investors (DIIs) have demonstrated robust buying activity in the Indian equity markets, extending the positive momentum observed in May through the current month of June. This sustained domestic demand has proven to be a significant stabilising factor for the market.

Over the combined period of May and June, DIIs have cumulatively invested more than ₹1.25 lakh crore in Indian equities.

Mutual Funds Drive DII Inflows

Key Highlights of DII Activity:

• Total Inflows: Over the combined period of May and June, DIIs have cumulatively invested more than ₹1.25 lakh crore into Indian equities.
• Mutual Fund Contribution: Mutual funds have been the largest contributors to these inflows, accounting for ₹89,000 crore of the total DII investment.
• Monthly Breakdown:
  • In June so far, mutual funds have purchased shares worth ₹35,900 crore.
  • This follows a robust net investment of ₹53,260 crore by mutual funds in May.Overall DII investments for June currently stand at over ₹59,000 crore, building upon the ₹66,194 crore recorded in May.

Block Deals Surge Amid Selective Buying

June has also seen significant offloading by promoters and private equity players, with block and bulk deals exceeding ₹42,000 crore. Key transactions include:

• Vishal Mega Mart: ₹10,220 crore (19% stake)
• Asian Paints (via Reliance): ₹9,600 crore
• Bajaj Finserv: ₹5,500 crore
• Aptus Value Housing: ₹1,900 crore
• Suzlon Energy: ₹970 crore
• Alkem Labs: ₹830 crore

Mutual funds have been highly selective in these deals, focusing on companies with visible earnings potential and reasonable valuations, supported by sustained SIP flows.

IPO Activity Sees Cautious Fund Participation

In the primary market, involving Initial Public Offerings (IPOs), mutual funds are showing a preference for high-quality issuances. While six IPOs collectively raised ₹8,983 crore in May, mutual funds participated in only three. For June, five IPOs have so far raised ₹4,448 crore, with significant upcoming issues anticipated from HDB Financials (₹12,500 crore) and Sambhv Steel Tubes (₹540 crore).

Valuation Concerns Amid Market Volatility

Despite the strong DII activity, market analysts have raised concerns regarding elevated valuations. While the Nifty 50 Index trades at 22 times its one-year forward earnings (a level generally considered acceptable historically), concerns remain about overvaluations in specific sectors. It’s noted that lower Price-to-Earnings (P/E) sectors, such as banks and metals, may be masking higher valuations elsewhere in the market.

The market has also shown signs of volatility. As of mid-June, benchmark indices Sensex and Nifty are each up by 0.3%, while BSE Midcap and Smallcap indices have gained 0.6%.

Mutual Funds Come Out as Leaders: What’s Ahead

Mutual funds continue to be a dominant force in driving equity inflows, acting as a stabilising influence amid fluctuating global conditions and a less enthusiastic FII sentiment. However, high valuations and increasing promoter exits suggest that a prudent and cautious investment approach may be advisable in the future.

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