India’s equity market is witnessing a decisive shift in ownership—and the numbers leave little room for doubt. As of March 2026, domestic institutional investors (DIIs) held 20.9% of Nifty-500 companies, a record high, while foreign institutional investors (FIIs) dropped to 17.1%, a multi-year low. This reversal comes amid sharp global volatility, with FIIs pulling out $15.8 billion in Q1 CY26 alone, including a massive $14.2 billion sell-off in March, even as DIIs poured in $27.2 billion, supported by steady SIP inflows, noted Motilal Oswal in a report.
Domestic money takes charge as FIIs retreat—India’s markets enter a new phase
India’s stock market is undergoing one of its most important structural transformations in decades. For years, foreign institutional investors (FIIs) dictated market direction—driving rallies, triggering corrections, and influencing valuations. That dominance is now clearly fading.
The latest data by Motilal Oswal shows that domestic institutional investors (DIIs), powered by mutual funds, insurance companies, and steady retail inflows, are emerging as the new anchor of India’s equity markets.
Volatility rises—but domestic flows hold the line
FY26 has been marked by heightened volatility, largely triggered by geopolitical tensions, particularly the Iran-Israel/US conflict. These global developments have caused sharp swings in FII behaviour.
In the first quarter of CY26:
FIIs recorded net outflows of $15.8 billion
Including a $14.2 billion sell-off in March alone
Yet, the market did not collapse. The reason lies in domestic flows:
DIIs invested $27.2 billion during the same period
This strong domestic participation has acted as a shock absorber, preventing deeper market corrections.
Ownership shift: A historic crossover
The most significant development is the shift in ownership:
DIIs now hold 20.9% of Nifty-500 companies (all-time high)
FIIs hold 17.1% (declining trend)
Over the past year:
DII ownership has increased by 170 basis points
FII ownership has declined by 180 basis points
This marks a clear turning point:
Domestic institutions have overtaken foreign investors in influence
Broad-based buying by DIIs
Unlike FIIs, whose investments have become more selective, DIIs are increasing exposure across the board.
DIIs raised holdings in 21 out of 24 sectors
Key increases seen in:
Private banks
Technology
Telecom
Real estate
Healthcare
Infrastructure
On a company level:
DIIs increased stakes in 73% of Nifty-500 companies
This signals broad confidence in India’s growth story
FIIs: Selling widely, reallocating selectively
FIIs, on the other hand, have reduced holdings in:
17 out of 24 sectors
Including key areas like:
Private banks
Technology
Consumer
Infrastructure
One of the most striking data points:
FII allocation to technology has dropped to an all-time low of 7.3%
However, FIIs are not exiting entirely—they are concentrating investments in:
BFSI (32.1% allocation)
Automobiles
Oil & Gas
This reflects a shift toward defensive, large-cap, and globally aligned sectors.
Across market caps: Domestic money absorbs the market
The divergence is visible across all segments:
FIIs:
Reduced stakes in:
Large caps: −220bp YoY
Mid caps: −60bp
Small caps: −100bp
DIIs:
Increased stakes in:
Large caps: 22%
Mid caps: 19%
Small caps: 17.7%
Domestic capital is absorbing supply across the entire market—not just select pockets.
Retail participation remains steady
Retail investors continue to play a supporting role:
Retail share in Nifty-500: 12.7%
Stable over the past three years
Their top sector allocations:
BFSI
Capital goods
Automobiles
Consumer
Healthcare
However, much of retail participation is now flowing through:
Mutual funds and SIPs rather than direct stock picking
Public sector and private companies both in focus
Both FIIs and DIIs are showing increasing interest in:
PSU companies
Large private sector firms
DII holdings:
Private companies: 21.5% (record)
PSU companies: 17.5%
FII holdings:
Increasing in PSUs
Declining in private companies overall
Public sector stocks are becoming a common investment theme
Key highlights of the report:
DIIs invested $27.2 billion in Q1 CY26, driven by strong SIP inflows
FIIs recorded $15.8 billion net outflows, including a sharp $14.2 billion sell-off in March 2026
Ownership shift is now visible:
DII holdings: 20.9% (all-time high)
FII holdings: 17.1% (multi-year low)
India’s markets are increasingly driven by domestic capital rather than foreign flows
Ownership shift: DIIs vs FIIs
DII ownership:
↑ 170 bps YoY (+50 bps QoQ) → 20.9% (record high)
FII ownership:
↓ 180 bps YoY (−110 bps QoQ) → 17.1%
Promoter holdings:
Stable at 49.4% (+40 bps QoQ)
Retail holdings:
↑ to 12.7% (+30 bps YoY & QoQ)
Domestic institutions have overtaken FIIs in influence
FII vs DII dominance (free float)
FII share of free float:
↓ to 33.8% (−360 bps YoY)
DII share:
↑ to 41.2% (+310 bps YoY)
FII-DII ratio:
↓ to 0.8x
DIIs now dominate free float ownership
Company-level trend
FIIs:
Reduced stake in 54% of Nifty-500 companies
DIIs:
Increased stake in 73% of companies
Nifty-50:
FIIs cut holdings in 78% of stocks
DIIs increased holdings in 82% of stocks
Domestic money is broadly accumulating across markets
Across market caps
Market composition:
Large caps: 67%
Mid caps: 22%
Small caps: 11%
FIIs:
Large caps: −220 bps YoY
Mid caps: −60 bps
Small caps: −100 bps
DIIs:
Large caps: 22% ownership
Mid caps: 19%
Small caps: 17.7%
DIIs are buying across all segments
Promoter & retail trends
Promoters:
Reduced stake in:
Mid caps: −300 bps
Small caps: −10 bps
Increased in large caps: +80 bps
Retail:
Large caps: 10.9% (+20 bps YoY)
Mid caps: 14.6% (+90 bps YoY)
Small caps: 20% (declining QoQ)
Retail is active—but not driving markets
Public vs private companies
DIIs:
Private companies: 21.5% (record high)
PSU companies: 17.5%
FIIs:
Private companies: ↓ to 19.5%
PSU companies: ↑ to 10.2%
Both are increasingly interested in PSUs
Sectoral trends: DIIs vs FIIs
DIIs:
Increased holdings in 21/24 sectors
Biggest additions:
Private banks (+420 bps)
Technology (+400 bps)
Telecom (+340 bps)
Real estate (+280 bps)
Infrastructure (+240 bps)
Healthcare (+220 bps)
FIIs:
Reduced holdings in 17/24 sectors
Biggest cuts:
Private banks
Technology
Real estate
Consumer
Infrastructure
Increased in:
PSU banks
Metals
Logistics
FIIs are reducing broad exposure
Key highlight: Tech exposure collapses
FII allocation to Technology:
↓ to 7.3% (all-time low)
↓ 280 bps YoY
One of the biggest structural shifts in sector allocation
Top sector allocations
FIIs:
BFSI: 32.1%
Automobiles: 8.5%
Oil & Gas: 7.8%
Technology: 7.3%
Healthcare: 6.9%
Top 5 sectors = 62.6% of FII allocation
DIIs:
BFSI: 28.2%
Oil & Gas: 8.3%
Consumer: 8%
Technology: 8%
Automobiles: 7.7%
Top 5 sectors = 60.2% of DII allocation
Top holdings
FIIs:
Total holdings: $696 billion
Top stocks:
HDFC Bank ($63.5b)
Reliance ($39.8b)
Bharti Airtel ($33.1b)
ICICI Bank ($32.6b)
Infosys ($18.9b)
DIIs:
Total holdings: $849 billion
Top stocks:
HDFC Bank ($43b)
Reliance ($40.6b)
ICICI Bank ($37.9b)
ITC ($28.4b)
SBI ($25.7b)
Retail positioning
Total share: 12.7%
Stable over 3 years
Top sectors:
BFSI: 27.2%
Capital goods: 9.8%
Automobiles: 7.7%
Consumer: 6.9%
Healthcare: 6.5%