FII & DII trends in May 2026

May 2026 was another volatile month for Indian markets, but there was one change. While Foreign Institutional Investors or FIIs continued to remain net sellers, the pace of selling eased compared to March and April. At the same time, Domestic Institutional Investors or DIIs stepped up their buying, providing support to the market and helping absorb the impact of foreign outflows.Let's take a closer look at FII and DII data for May 2026 and understand the key global and domestic factors that affected investment flows.FII & DII activity in May 2026In May 2026, FIIs remained net sellers for the 11th month in a row in the cash segment. In May, FIIs purchased shares of ₹353,913.83 crore and sold shares of ₹409,877.16 crore, resulting in a net outflow of ₹55963.33 crore from Indian equities.However, DIIs continued to counter the foreign selling. DIIs purchased ₹361,325.17 crore and sold shares of ₹278,656.24 crore, leading to a net inflow of ₹82668.93 crore in May 2026.Net buying by domestic investors provided stability to the market.Here is a quick summary of FII and DII inflows and outflows for May 2026 Investor CategoryGross Purchase (₹ Cr)Gross Sales (₹ Cr)Net Flow (₹ Cr)FIIs3,53,913.834,09,877.16-55,963.33DIIs3,61,325.172,78,656.2482,668.93 Source: NSDL, NSE Cash Market Data, May 2026.Why were FIIs selling in May 2026?Here are the main reasons explaining why FIIs have been continuously selling in India.One of the biggest reasons behind the FII selling in May was the rise in global uncertainty. Tensions in West Asia, involving Iran and the US, raised concerns about disruptions in the Strait of Hormuz, one of the world's most important oil shipping routes. As crude oil prices jumped above the $100 per barrel mark, investors began worrying about a fresh wave of global inflation.Another challenge was the weakening of the Indian rupee. In May, the Indian rupee touched ₹96 per dollar. As foreign investors evaluate returns in dollar terms, a weaker rupee reduces their overall gains, making Indian equities less attractive.Also, US bond yields remained high as inflation in the US stayed sticky and expectations of Federal Reserve rate cuts kept getting pushed back. As safer dollar-denominated assets offering attractive returns, many global funds preferred parking funds in US bonds rather than taking additional risk in emerging markets.Valuations are another reason for FII. Indian markets were trading at 20 times earnings, a premium to many other emerging markets. Some foreign investors chose to shift capital to relatively cheaper markets, while others increased exposure to AI-led opportunities in countries such as the US, South Korea and Taiwan.Why were DIIs buying in May 2026?While foreign investors continued to pull money out of Indian equities, domestic investors once again stepped in to support the market. Here are some reasons that explain why DII has been continuously buying in India.The main reason is long-term confidence that Indian fund managers have in the country's growth story. Many fund houses and CIOs continue to recommend selective buying during market declines, pointing to India's strong economic fundamentals and an expected Nifty earnings CAGR of around 16% between FY26 and FY28.For most domestic institutions, the current phase of FII selling is being seen as a short term challenge rather than a long term concern. As a result, DIIs have continued to invest in fundamentally strong companies across sectors, helping absorb foreign selling pressure and keeping volatility in control.Final WordsMay 2026 once again showed the contrasting behaviour of foreign and domestic investors. While FIIs remained net sellers for the 11th consecutive month due to global uncertainties, currency pressures and valuation concerns, DIIs continued to absorb the selling through strong domestic inflows and sustained investor participation.May data also showed the growing influence of domestic capital in Indian markets. Despite net FII outflows of ₹55,963.33 crore, DII inflows of ₹82,668.93 crore helped limit market volatility. Going forward, global interest rate trends, crude oil prices, rupee movement and corporate earnings will remain key factors determining the direction of FII and DII flows in the coming months.

FII & DII trends in May 2026

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