Who is buying what? PSUs emerge as investor darling both FIIs and DIIs

Public Sector Undertakings (PSUs) have become the top destination for both Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs), signaling a powerful shift in market sentiment toward India’s state-owned enterprises.

 

According to Motilal Oswal Financial Services Ltd.’s latest India Strategy Report, PSU stocks saw a surge in institutional interest in FY25, with FII holdings rising to 18.1% (up 140bps YoY), while DII holdings hit a record 18.8% (up 120bps YoY). This makes PSUs the only segment within the Nifty-500 to attract record-high interest from both investor classes simultaneously.

 

This is in stark contrast to private companies, where FII ownership slid to a decade-low 20.1%, down 90bps YoY. Even as primary and secondary market buoyancy led to increased equity dilution among private promoters, their overall holdings fell to an all-time low of 47.5% in the Nifty-500.

 

The quiet rise of PSUs 

The institutional rush into PSUs is underpinned by a combination of value, visibility, and reform-driven potential. Promoter stakes in PSU firms dropped to 54.1% in Mar’25 (from 56.8% YoY), indicating that the government has actively been reducing its stake—creating more float and investable space for institutions.

 

Both FIIs and DIIs appear to be betting on re-rating potential in sectors like PSU Banks, Oil & Gas, Utilities, and Insurance—all traditional PSU strongholds that are now benefiting from improved balance sheets, digitization, and capital infusion.

 

Sector Trends: Who’s buying what?

 

FII Favorites

FIIs significantly raised their stakes in BFSI (34.4% allocation), with top bets in Private Banks, NBFCs, and Telecom. Notably:

 

FII holdings in NBFC – Non-Lending rose +400bps YoY

 

Telecom up +200bps

 

Real Estate up +170bps

 

Their top 5 stock holdings include:

 

HDFC Bank – $89.2B

 

ICICI Bank – $61.5B

 

Reliance Industries – $41B

 

Bharti Airtel – $30.6B

 

Infosys – $30.3B

 

FIIs were overweight on Private Banks, Telecom, and Real Estate but underweight on PSU Banks, Consumer, and Capital Goods.

 

DII bets

DIIs increased stakes across 18 out of 24 sectors, with the highest YoY increases in:

 

Private Banks (+340bps)

 

Consumer Durables (+290bps)

 

PSU Banks (+220bps)

 

Utilities (+220bps)

 

Top sectoral exposures for DIIs include:

 

BFSI – 27.3%

 

Consumer – 9.8%

 

Technology – 9.3%

 

Oil & Gas – 8.5%

 

Automobiles – 7%

 

Their top 5 stock holdings:

 

HDFC Bank – $50.1B

 

ITC – $41.8B

 

ICICI Bank – $40.3B

 

Reliance – $38.4B

 

Infosys – $26B

 

Interestingly, while DIIs are heavy on Consumer and Oil & Gas, they remain underweight on Private Banks and NBFCs despite increasing exposure.

 

Retail Holding: Flat

Retail investors have maintained a steady stake in the Nifty-500, with ownership stable around 12–13% over the past three years. As of Mar’25, their allocation stood at 12.4%, with top sector bets in BFSI (23.8%), Capital Goods (10.3%), and Consumer (8.3%).

FIIs significantly raised their stakes in BFSI (34.4% allocation), with top bets in Private Banks, NBFCs, and Telecom.