DII ownership in Nifty 500 rises for the ninth straight quarter to a record 21% as FII stake drops to 17%

India's equity market is increasingly becoming a domestic investors' story. Persistent inflows from institutional and retail investors have propelled DII ownership in Nifty 500 companies to an all-time high of 21% as of June 2026, even as foreign investors continued to retreat, with FII holdings dropping to a record low of 17%, according to a report by Motilal Oswal Financial Services.

The report highlighted that DIIs have increased their ownership for the ninth consecutive quarter, maintaining a structural shift in institutional ownership that has gathered momentum since 2021. Over the past one year, DII ownership rose 160 basis points (bps) year-on-year and 20 bps sequentially to 21%, while FII ownership declined 190 bps year-on-year and 10 bps quarter-on-quarter to 17% from 18.9% in June 2025.

"Over the past one year, DII ownership rose 160bp YoY (+20bp QoQ) to an all-time high of 21% in Jun'26, while FII ownership dipped 190bp YoY (-10bp QoQ) to 17%," the brokerage said.

DII inflows of $166 bn offset $58 bn in FII outflows

The report attributed the trend to sustained domestic inflows offsetting persistent foreign selling. It noted that geopolitical uncertainties, moderating earnings growth, and elevated valuations have kept foreign investors cautious, resulting in cumulative FII outflows of $58 billion over the past 22 months since the Indian market peaked in September 2024.

However, strong domestic inflows have more than offset overseas selling. Record DII inflows of $166 billion over the past 22 months, coupled with resilient retail participation through average monthly systematic investment plan (SIP) inflows of around $3 billion, have absorbed sustained foreign outflows.

"A combination of geopolitical uncertainties, moderating earnings growth, and elevated valuations has kept FII sentiment toward India firmly negative... However, record DII inflows of $166 billion during the same period, along with resilient retail participation—average monthly SIP inflows of around $3 billion—have emerged as a powerful counterbalance, comfortably absorbing foreign selling," the report said.

In the second quarter of CY26 alone, DIIs invested $22.8 billion in Indian equities, while FIIs recorded net outflows of $13.2 billion despite turning marginal net buyers in the second half of June.

DIIs raise holdings in 19 sectors; FIIs cut exposure in 19

According to the report, DIIs increased their holdings year-on-year in 19 of the 24 sectors within the Nifty 500 universe, while FIIs reduced their exposure in 19 sectors.

Sector-wise, FIIs reduced their holdings in 19 of the 24 sectors in the Nifty 500 over the past year. Despite the decline, their highest exposure remained in private banks (41.1%), followed by telecom (22.2%), real estate (18%), consumer durables (17.7%), NBFC-lending (17.4%), healthcare (17.1%), automobiles (16.8%), oil & gas (15.9%), and technology (15.6%). FIIs increased their stakes only in a few sectors, including logistics, metals, PSU banks, NBFC-lending, and capital goods.

DIIs, on the other hand, increased their holdings in 19 of the 24 sectors. Their largest exposure was also to private banks (38.5%), followed by consumer (23.8%), telecom (23.2%), oil & gas (22%), and technology (21.8%). The biggest increase in DII holdings was in private banks, followed by telecom, real estate, technology, healthcare, automobiles, and PSU banks.

"Within the Nifty 500 companies, FIIs reduced their holdings in 59% of the companies year-on-year, while DIIs increased their stakes in 73%," the report noted. In the Nifty 50, FIIs cut holdings in 72% of the companies, while DIIs increased their stakes in 82%.

Across market capitalisations, DIIs continued to increase their exposure to large-, mid-, and small-cap stocks, taking their holdings to record highs across all three categories.

DII ownership in large-, mid-, and small-caps rose 130 bps, 220 bps, and 180 bps YoY to 22.3%, 19.1%, and 17.2%, respectively. On a sequential basis, DII holdings increased 20 bps in large-caps and 40 bps in mid-caps, while remaining unchanged in small-caps.

In contrast, foreign investors reduced their stakes by 230 bps in large-caps, 90 bps in mid-caps, and 120 bps in small-caps year-on-year. Sequentially, FII holdings remained unchanged at 19% in large-caps and 10.7% in small-caps, while slipping 20 bps in mid-caps to 14.3%.

Promoter ownership also diverged across market segments. While promoter holdings in large-caps increased 70 bps year-on-year to 47.7%, they declined by 160 bps in mid-caps and 10 bps in small-caps. Retail ownership, meanwhile, moderated in large-caps to 11% (+30 bps YoY; -20 bps QoQ). In mid-caps, retail holdings stood at 13.3% (+30 bps YoY; flat QoQ), while in small-caps they eased to 20.2% (-50 bps YoY; -10 bps QoQ).

The report also showed that DII ownership in private companies climbed to an all-time high of 21.8% in June 2026, while FII holdings in private companies dropped to 19.4%.

Despite the decline in ownership, BFSI remained the largest allocation for foreign investors. FII allocation to private banks, PSU banks, NBFCs, and insurance rose to 34.6% of their Nifty 500 portfolio in June 2026, up 250 bps sequentially, leaving them overweight on the sector by 370 bps relative to its benchmark weight.

"DII allocation in BFSI climbed to an all-time high of 29.4% (+120bp QoQ, +190bp YoY) in Jun'26," the report said.

In absolute terms, FIIs held investments worth $750 billion in the Nifty 500, with private banks accounting for the largest share at $158 billion. HDFC Bank, ICICI Bank, Reliance Industries, Bharti Airtel, and Axis Bank together accounted for 27% of the total FII holding value.

DIIs, whose total holdings stood at $929 billion, also had their largest exposure to private banks at $148 billion, followed by automobiles, consumer, capital goods, and oil & gas. HDFC Bank, ICICI Bank, Reliance Industries, ITC, and State Bank of India together accounted for 20% of the total DII holding value.