Domestic Institutional Investors have significantly bolstered their presence in the Indian equity market, with their holdings in Nifty 500 companies reaching an unprecedented 20.9 per cent, even as Foreign Portfolio Investors continue to divest, marking a structural shift in ownership dynamics.
Key Points
- DII holdings in Nifty 500 companies reached a record 20.9 per cent by March 2026, while FPI ownership fell to an all-time low of 17.1 per cent.
- DIIs injected $27.2 billion into equities during the March quarter, absorbing significant foreign selling.
- FPIs recorded $15.8 billion in outflows during the March quarter, including $14.2 billion in March alone due to geopolitical tensions.
- The increase in DII ownership is broad-based, with stakes rising in 21 of 24 sectors, including private banking, technology, and real estate.
- This shift towards domestic ownership is considered a structural trend, driven by increased financialisation of household savings and deepening capital markets.
The structural shift in India’s equity ownership persisted in the January-March 2026 quarter, with domestic institutional investors (DIIs) strengthening their hold even as foreign portfolio investors (FPIs) continued to pull back.
According to an analysis by Motilal Oswal Financial Services (MOFSL), DII holdings in Nifty 500 companies climbed to a record 20.9 per cent at the end of March, while FPI ownership slipped to an all-time low of 17.1 per cent. The FII-to-DII ownership ratio contracted to 0.8x.
Divergence in Investor Sentiment
This divergence comes against the backdrop of heightened geopolitical tensions and volatile global flows, which have weighed on foreign investor sentiment but failed to dent domestic participation.
"DIIs remain the bedrock," the brokerage said, observing that sustained inflows — particularly through systematic investment plans — have enabled local institutions to absorb heavy foreign selling and stabilise markets.
DIIs pumped $27.2 billion into equities during the March quarter. FPI flows remained volatile — turning briefly positive in February before offloading $14.2 billion in March amid the Iran conflict, taking total quarterly outflows to $15.8 billion.
The brokerage said that even slight moderation in FPI outflows could act as a trigger for market upside, while a reversal to sustained inflows may lead to sharper rallies.
Broad-Based DII Growth
The rise in DII ownership is not confined to a handful of sectors. Domestic institutions increased stakes in 21 of 24 sectors over the past year, with prominent additions in private banking, technology, telecommunications, real estate, healthcare, and non-banking financial company, the MOFSL analysis showed.
In contrast, FIIs reduced exposure in 17 sectors, with the sharpest cuts seen in private banking, real estate, technology, and consumer segments.
DIIs have increased holdings across large, mid, and smallcap stocks, while FIIs have trimmed exposure across the board.
Retail participation, too, has edged up to 12.7 per cent, adding another layer of domestic support.
Structural Shift in Market Dynamics
The report highlights that this trend, which began around 2021, is structural rather than cyclical, driven by rising financialisation of household savings and deepening domestic capital markets.
While domestic investors have emerged as the market’s anchor, foreign flows remain a key swing factor, the brokerage said.
A stabilisation in geopolitical conditions — particularly easing tensions linked to the Iran conflict — could improve the outlook for FPI flows, it added.
© 2026