India’s economy is showing strong resilience, as reflected in the record GST collections in April 2025, which hit an all-time high of ₹2.37 trillion-up 12.6% year-on-year. This is the highest monthly GST mop-up ever recorded and signals a buoyant economy, despite recent global challenges like fears of a slowdown and the Trump Tariff impact. Indian stock markets responded positively, with the Sensex and Nifty 50 both rising over 0.5%.
In another notable development, Domestic Institutional Investors (DIIs) now hold more Indian stocks than Foreign Institutional Investors (FIIs) for the first time. As of March 31, 2025, DIIs held a record 17.62% stake in listed Indian companies, slightly ahead of the 17.22% held by FIIs, as per data from primeinfobase.com. This shift shows how Indian markets have matured, but it’s important to remember that FIIs still play a critical role by bringing in foreign capital, deepening the markets, and supporting economic integration. FIIs which include large institutions like mutual funds and pension funds have been contributing around $20 billion annually to India, second only to Japan among Asian countries.
Over the past two decades, Foreign Portfolio Investors (FPIs) and FIIs have significantly shaped Indian capital markets. Their investments, especially during the economic reforms of the 1990s and early 2000s, helped fuel market rallies and improve liquidity. They played a key part in aligning Indian markets with global financial systems.
The Securities and Exchange Board of India (Sebi) has developed a regulatory framework for FPIs and FIIs that aims to ensure transparency, investor protection, and smooth functioning. FPIs are categorized based on risk, and recent reforms have merged FIIs and Qualified Foreign Investors (QFIs) under the broader FPI category. These steps have reduced compliance burdens, though challenges remain particularly around KYC (Know Your Customer) requirements. While KYC is essential for preventing financial crimes, many FPIs face difficulties in meeting complex
disclosure norms, especially when dealing with global data privacy laws or intricate ownership structures.
Sebi has tried to address these concerns through updated circulars and eased norms for example, raising compliance thresholds in April 2025. However, many FPIs have reported that the short reporting timelines and extensive documentation required still create hurdles. A 2023 representation to Sebi even highlighted that public-retail funds could find it hard to meet disclosure norms, asking for greater flexibility. To maintain India’s appeal as a global investment destination, it’s important for Sebi to strike a balance between strong regulation and ease of business. Ongoing consultation with market participants and efforts to align with international standards will help streamline compliance.