 "Indian equities continue their upward trajectory but largecaps, those stocks valued at Rs 20,000 crore or more, continue to underperform the broader market. The largecap-oriented BSE Sensex is up 31.9 per cent since the end of October last year laggi")
In a first, domestic institutional investors (DIIs) now own a larger share of India’s top 500 listed companies than foreign institutional investors (FIIs), according to the latest India Strategy Report by Motilal Oswal Financial Services Ltd. (MOFSL). This milestone marks a structural realignment in India’s capital markets, driven by strong domestic inflows, persistent FII selling, and expanding retail participation over the past decade.
As of March 2025, DII holdings reached a record 19.2% in Nifty-500 companies, overtaking FII ownership, which fell to a decadal low of 18.8%. A decade ago, the FII-DII ownership ratio stood at 2.1x; today, it has dropped to 1x, reflecting the growing dominance of domestic capital.
The report highlights that while promoter holdings have slipped to an all-time low of 49.5%, retail investor stakes remain flat, with most of the shift in ownership coming from institutional rebalancing. Over FY15–FY25, DIIs invested $195 billion, a staggering 3.7x more than FIIs (USD 53 billion) during the same period. This change accelerated post-FY21, with India’s post-COVID recovery, rising SIP volumes, and mutual fund penetration driving domestic flows.
Despite periods of volatility—including the 2024 general elections, global interest rate spikes, and recent geopolitical concerns—Indian markets scaled new highs, underpinned by DII conviction even as FIIs pulled back sharply.
The MOFSL report also notes that DIIs increased their holdings across 18 of 24 sectors, with the highest inflows going to Banks (private and PSU), Consumer Durables, Technology, Cement, Insurance, Oil & Gas, and Automobiles—sectors seen as long-term structural plays.
DII holdings in the Nifty-500 surge for the fourth consecutive quarter
Over the past one year, DII ownership rose 160bp YoY (+70bp QoQ) to an all-time high of 19.2% in Mar’25 (vs. 17.6% in Mar’24), while FII ownership dipped 40bp YoY (-10bp QoQ) to an all-time low of 18.8% (vs. 19.2% in Mar’24).
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Promoter holdings, which have historically remained range-bound, also declined meaningfully by 140bp YoY (down 30bp QoQ) to an all-time low of 49.5% in Mar’25.
The sharp drop was driven by a buoyant primary market in 2024, where high valuations and strong investor appetite provided an attractive opportunity for several promoters to liquidate their stakes.
Retail holdings were broadly stable and increased marginally by 10bp YoY, but declined 40bp QoQ to reach 12.4% by Mar'25.
Sectoral holdings trends: Within the NIfty-500, FIIs and DIIs showcased divergent trends. On a YoY basis, DIIs increased their holdings in 18 sectors (out of 24 sectors) – the top increase in holdings was seen in Banks (Private & PSU), Consumer Durables, Consumer, Insurance, Utilities, Technology, Cement, Oil & Gas, Automobiles, and Retail.
In contrast, FIIs experienced a decline in all these sectors, except Technology and Consumer Durables.
On a QoQ basis, DIIs increased their holdings in most of the sectors, except NBFC-Non Lending, Consumers, Logistics, and Media. Conversely, FIIs reduced their holdings in most sectors, barring Telecom, NBFCs, Chemicals, Insurance, and Media, which saw an increase QoQ.
FII-DII ownership ratio continues to contract
- As a proportion of the free float of Nifty-500, FII ownership decreased 190bp YoY (-30bp QoQ) to 37.3%, while DII ownership increased 220bp YoY (+110bp QoQ) to 38%.
- The FII-DII ownership ratio in the Nifty-500 contracted 10bp YoY (flat QoQ) to 1x in Mar’25.
- Over the last one year, the FII-DII ratio has expanded primarily in NBFC Non-lending, EMS, Infrastructure, Telecom, and Media sectors, while it contracted in 15 out of 24 sectors.
- Within the Nifty-500 companies, FIIs reduced their holdings in 48% of the companies YoY, while DIIs increased their stake in 67% of the companies.
- In the Nifty-50, FIIs reduced their holdings in 82% of the companies, while DIIs raised their holdings in 84% of the companies.
Analyzing the Caps: Domestic institutions raise their stakes across the board
According to SEBI's categorization, large-, mid-, and small-cap stocks accounted for 68%, 21%, and 11% of the total Nifty-500 market cap, respectively.
FII, Promoter, and Retail holdings in large-caps dipped to near-lows/the lowest levels of 21.1%, 47.6%, and 10.8%, respectively. In contrast, DII holdings in large-caps rose to an all-time high of 20.4% as of Mar’25.
Analyzing the institutional holding patterns:
- (i) FIIs reduced their stakes in large caps by 50bp YoY, whereas their holdings in mid-caps remained unchanged YoY, and increased in small-caps (+20bp) on YoY basis. On a QoQ basis, FIIs reduced their stakes across all categories by 10bp/60bp/10bp to 21.1%/14.7%/12.2%;
- ii) DIIs significantly raised their stakes across market caps by 200bp/80bp /60bp YoY (+60bp/+50bp/+20bpQoQ), to 20.4%/17.1%/ 15.2%; and
- iii) Promotors notably reduced their YoY holdings across market caps (-160bp/-130bp/-30bp YoY and 30bp/+40bp/+10bp QoQ) to 47.6%/54.9%/51.4% as of Mar’25.
- Notably, Promoter holdings in large-caps dipped to an all-time low, while holdings in mid-cap stocks reached the second-lowest level and remained low in small-caps;
- iv) Retail holdings were near their lows in large- and mid-caps at 10.8% and 13.3%, respectively, while their holdings remained strong in small-caps at 21.2%.
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