Domestic money takes control: DII holding hits 20.9%, FIIs fall to 17.1%

FIIs Lose Ground Across Sectors as DIIs Expand in 21 of 24 Segments

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%