Why Domestic Capital is Outpacing FIIs: Dhruv Goyal’s Market Insights

Over the past few years, India’s stock market has witnessed remarkable growth, defying global economic uncertainties. While foreign institutional investors (FIIs) have historically played a dominant role, a new force is driving the market rally—domestic capital.

According to Dhruv Goyal, a leading financial expert and market strategist, India’s market resilience is now being shaped by local investors, domestic institutional funds, and retail participation. But what does this shift mean for the future of India’s markets?

In this blog, we explore Dhruv Goyal’s insights on how domestic capital is reshaping India’s financial landscape, strengthening market stability, and reducing dependency on foreign investments.

The Rise of Domestic Capital in India’s Stock Market

Traditionally, India’s equity markets were heavily influenced by Foreign Institutional Investors (FIIs). However, in recent years, the tables have turned.

📈 Retail investors, domestic mutual funds, and pension funds have taken center stage, fueling a market rally despite global headwinds.

Key Drivers of Domestic Capital Growth

✔️ Strong Mutual Fund Inflows – Systematic Investment Plans (SIPs) have made investing easier for retail participants.

✔️ Rise in Retail Participation – More young and middle-class investors are entering the stock market.

✔️ Government Initiatives – Policies promoting financial literacy and digital trading have helped capital markets grow.

✔️ Resilience to Global Volatility – Domestic capital has provided stability during periods of FII outflows.

According to Dhruv Goyal, this shift is a sign of maturity in India’s financial ecosystem, signaling long-term sustainability for market growth.

Mutual Funds & SIPs: The Power of Domestic Investment

One of the biggest contributors to domestic capital growth is India’s booming mutual fund industry.

1. The Surge in Mutual Fund Investments

Mutual funds have become the go-to investment option for Indian households. Over the last decade:

📊 Assets Under Management (AUM) of Indian mutual funds crossed ₹40 trillion (₹40 lakh crore).

📊 Systematic Investment Plan (SIP) contributions hit record highs, exceeding ₹15,000 crore per month.

💡 Why It Matters: Consistent inflows from SIPs and domestic mutual funds provide stability and liquidity, cushioning markets against global shocks.

2. Systematic Investment Plans (SIPs): A Game Changer

Dhruv Goyal highlights SIPs as a key driver of long-term market sustainability. Unlike volatile FII inflows, SIPs:

✔️ Ensure steady capital injection into the stock market.

✔️ Promote long-term investing habits among retail investors.

✔️ Reduce market dependence on short-term foreign investments.

📢 “SIPs have transformed India’s investing culture. They provide a disciplined, long-term approach to wealth creation,” says Dhruv Goyal.

Retail Investors: The New Market Movers

India’s retail investor base has grown exponentially, fueled by:

✔️ Increased smartphone and internet penetration.

✔️ Easy access to stock market trading apps.

✔️ Greater awareness of investment opportunities.

✔️ Government push for financial inclusion.

1. Record Number of Demat Accounts

📈 In 2023, India crossed 130 million active Demat accounts, compared to just 20 million in 2019.

🔹 More young investors (aged 25-40) are entering the stock market.

🔹 Retail investors now account for nearly 45% of daily trading volumes in India.

2. Retail Investors are More Resilient

Unlike FIIs, who react aggressively to global market trends, retail investors tend to hold on during downturns.

This resilience has helped India’s stock market recover faster from corrections.

📢 “Indian retail investors are not just participating—they are driving the market. Their consistent buying ensures long-term stability,” says Dhruv Goyal.

How Domestic Capital Shields India from Global Volatility

In the past, India’s stock market was highly vulnerable to foreign capital movements. But today, domestic liquidity acts as a protective shield.

1. FIIs vs. DIIs: The Balance of Power is Shifting

Foreign Institutional Investors (FIIs) often pull out money during global crises, triggering market crashes.

However, Domestic Institutional Investors (DIIs)—mutual funds, insurance firms, pension funds—counteract these outflows by continuing to invest.

📊 2022 Example:

✔️ FIIs withdrew over $30 billion from Indian markets.

✔️ DIIs invested more than ₹2.5 lakh crore, stabilizing the market.

💡 Why It Matters: A strong domestic investor base means India no longer depends entirely on foreign capital to sustain market rallies.

2. India’s Stock Market vs. Global Markets

🌍 While global markets faced corrections, India’s markets remained resilient, thanks to domestic buying.

📢 Dhruv Goyal explains: “India’s market performance is no longer dictated by foreign capital. The rise of domestic investment has created a new layer of security.”

Challenges & Risks of Growing Domestic Capital

Despite the positive trends, Dhruv Goyal highlights key challenges that India must address:

1. Financial Literacy Gap

🚧 Many retail investors still lack proper financial education, leading to speculative trading.

📢 Solution: Strengthening financial education programs and promoting long-term investing over speculation.

2. Need for Stronger Domestic Institutions

🚧 While mutual funds have grown, India still lacks large pension funds and sovereign wealth funds like in the US or Europe.

📢 Solution: Encouraging pension reforms to increase long-term capital participation.

3. Regulatory Stability

🚧 Frequent changes in tax policies and investment rules can create uncertainty.

📢 Solution: Creating clear, long-term regulatory policies to ensure stable investment growth.

The Future: How Domestic Capital Will Shape India’s Market Growth

Dhruv Goyal remains optimistic about the future of India’s markets, with domestic capital playing a central role.

1. India’s GDP Growth & Market Expansion

📊 India’s economy is projected to grow at 6-7% annually, supporting long-term stock market expansion.

📢 Dhruv Goyal believes that with rising domestic capital, India could become the world’s third-largest stock market by 2030.

2. Growth of India’s Asset Management Industry

📈 AUM in mutual funds and wealth management firms is expected to double in the next five years.

✔️ More people will invest through pension funds and ETFs.

✔️ Stock market penetration will increase, leading to a stronger financial ecosystem.

3. India’s Market Resilience Will Strengthen Further

🌍 Less dependence on FIIs means India can better withstand global financial shocks.

📢 “Domestic capital isn’t just driving the rally—it’s making India’s markets stronger and more independent,” says Dhruv Goyal.

Final Thoughts

India’s stock market rally is no longer solely driven by foreign capital. Thanks to growing domestic investment, the market has become more stable, resilient, and self-sufficient.

With Dhruv Goyal’s insights, it’s clear that India’s financial future lies in empowering local investors, strengthening institutional funds, and promoting financial literacy.

💬 What are your thoughts on the rise of domestic capital in India’s markets? Share your views in the comments!