Highlights
- DIIs hit record ownership in Nifty, overtaking FIIs amid sustained foreign outflows and volatility
- Domestic inflows offset $15.8 billion FII selling, signalling structural shift in India’s market dynamics
- Rising DII dominance across sectors strengthens market resilience, reducing dependence on foreign capital flows
Domestic institutional investors in India have strengthened their hold on the stock market, with ownership in Nifty-linked companies rising to record levels even as foreign investors trim exposure amid global geopolitical volatility, according to Motilal Oswal.
The brokerage noted that domestic institutional investors (DIIs) now hold 25.4 per cent of the Nifty 50 as of March 2026, the highest on record, while foreign institutional investor (FII) ownership has declined to 22.2 per cent, a multi-year low, signalling a structural shift in India’s market ownership pattern.
The trend is also visible across the broader Nifty 500 universe, where DII ownership has risen for the eighth consecutive quarter to a record 20.9 per cent, while FII holdings have declined to 17.1 per cent, the lowest in a decade. The FII-to-DII ownership ratio has compressed to 0.8x from 1.7x in 2016, underscoring how domestic capital is increasingly replacing foreign inflows as the market’s stabilising force.
Foreign selling pressure
Motilal Oswal attributed the renewed foreign selling pressure to heightened global risk aversion driven by the Iran-Israel-US conflict, which led to fresh outflows in March after a brief return of inflows in February.
Foreign investors withdrew $15.8 billion during the March quarter of CY26, including $14.2 billion in March alone, while domestic institutions infused $27.2 billion, supported by steady SIP inflows.
“DIIs remain the bedrock,” the brokerage said, adding that even a pause in foreign selling could act as a catalyst for sharper market rallies. Within the Nifty, DIIs raised their stakes in 82 per cent of index constituents, while FIIs cut holdings in 78 per cent of companies over the past year.
On the sectoral front, foreign investors remained overweight on private banks, telecom and automobiles. However, their allocation to technology fell to a record low of 7.3 per cent in March, down 280 basis points year-on-year, reflecting continued caution toward IT exporters.
Domestic institutions
Domestic institutions, meanwhile, increased their holdings across 21 of the 24 sectors in the Nifty 500 universe, with the most significant buying seen in private banks, technology, telecom, real estate, healthcare and infrastructure.
Among key sectors, DII ownership in technology increased by 400 basis points year-on-year, while private banks witnessed a 420 basis point rise.
FII ownership and DII holdings
FII ownership in large-cap stocks declined to 19.3 per cent, while DII holdings climbed to a record 22 per cent. In mid- and small-cap segments, DII ownership also hit all-time highs of 19 per cent and 17.7 per cent, respectively.
The report indicates that, for the Nifty, the focus is shifting away from foreign flows toward the increasing capacity of domestic capital to absorb shocks, a change that could make Indian equities less vulnerable to global risk-off cycles than in the past.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
