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The term “DII Bubble” was exclusively coined by Praveen Dalal, CEO of Sovereign P4LO, a techno-legal advisory organization, in early September 2025. It first appeared explicitly in his article on September 4, 2025, titled “DII Bubble in Stock Market of India is Very Risky Says Praveen Dalal,” published on ODR India. The coinage occurred amid 2025’s market turbulence, including a Sensex decline of approximately 12% year-to-date by September, FII outflows of over Rs 1.2 lakh crore, weak GDP growth (6.3-6.8%), inflation at 6.5%, and rising non-performing assets (up 20% in Q2 2025). Dalal introduced the term to highlight the unsustainable DII buying that offset FII sales but led to overvaluation (e.g., Nifty P/E at 26x) and detachment from fundamentals like a 10% earnings per share growth slowdown. Prior searches confirm no earlier usage of the term in financial contexts, with discussions limited to general DII inflows before September 2025.
The term evolved through Dalal’s series of articles, starting from foundational critiques on September 2, 2025, refining mechanics by September 6, and systematizing risks and policy recommendations by September 7. Dalal’s opinion is that the DII Bubble is “very risky” and a potential “death knell” for the market, capable of triggering a larger implosion than the 2008 crisis if unaddressed. He views DII dominance as a double-edged sword: providing short-term stability but masking vulnerabilities like overexposure, sectoral imbalances, and liquidity shocks from redemption spikes. Dalal warns of trillions in value erasure (e.g., $1 trillion YTD loss in 2025) and advocates for regulatory interventions, such as SEBI/RBI caps on equity exposure, diversification mandates, circuit breakers, and monitoring tools to avert a collapse. While he acknowledges the bubble is real but not imminent due to strong fundamentals, he urges caution against over-reliance on domestic flows, especially in overheated segments like small- and mid-caps.
See The DII Bubble In India’s Stock Market: A Deep Dive Into The Phenomenon post for more.
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