India’s Capital Market To Become Third Largest ‘Very Soon’ Despite Global Headwinds: DIPAM Secretary

The domestic institutional investors (DIIs) provided a cushion to the massive outflow of Foreign Institutional Investors (FIIs) from India’s market in recent times.

DIPAM Secretary Arunish Chawla on Monday said domestic investors are bringing a “fresh breeze” to India’s capital markets. He added that India’s capital markets will be the third-largest in the world “very soon”, despite global headwinds.

Speaking with at Network18 Reforms Reloaded in New Delhi, Chawla highlighted a structural change marked by greater democratisation and the growing role of small investors. “We will come back with more valuable sharings with domestic investors,” he said.

“In spite of global headwinds, very soon our capital markets will be the third largest in the world,” Chawla added.

He said PSBs account for 14% of market capitalisation but contribute 25% of dividends to small shareholders. He added that the target is to exceed Rs 1,20,000 crore in dividend payouts this year, while staying on course to meet the asset monetisation target in FY26.

The domestic institutional investors (DIIs) provided a cushion to the massive outflow of Foreign Institutional Investors (FIIs) from India’s market in recent times. A ‘Market Pulse’ report by the National Stock Exchange mentioned that DIIs continued to provide a counterbalance to FPI selling. It said that August marked the 25th consecutive month of net DII inflows, with purchases of Rs 94,829 crore – the highest in the last ten months.

“In the first five months of FY26, DIIs have invested a net Rs 3.24 lakh crore (US$37.6 bn), already accounting for 53% of the total net investment made during the entirety of the previous fiscal year,” the report added.

the NSE report added, resilience in the domestic economy—evident in Q1 GDP growth that significantly outpaced expectations, robust PMI readings, and a benign inflation trajectory—helped limit the downside.