Domestic institutional investors (DIIs) continued their buying spree in Indian equities in the March quarter of 2026, with holdings in the Nifty-500 universe climbing to a new record high of 20.9%, even as foreign institutional investors (FIIs) pared exposure amid global uncertainty and valuation concerns.

DII ownership rose 170 basis points year-on-year (YoY) and 50 basis points sequentially, while FII ownership fell 180 basis points YoY and 110 basis points QoQ to 17.1%, from 18.9% a year ago, according to a latest report by Motilal Oswal Financial Services. Retail participation also strengthened, with holdings inching up to 12.7%, while promoter ownership remained broadly stable at 49.4%.

“Domestic investors have continued to repose their unstinted faith in Indian equities, demonstrating strong resilience and an impressive capacity to absorb volatility over the past few years,” the report noted.

In Q1 CY26, DIIs invested $27.2 billion in Indian equities, supported by a steady SIP inflow trend. On the other hand, FII outflows during the quarter stood at $15.8 billion, triggering heavy selling of $14.2 billion in March amid the onset of the Iran war and a sharp spike in crude oil prices.

The report showed that the divergence between domestic and foreign investors was also visible across sectors. DIIs increased holdings in 21 out of 24 sectors over the past year, with the sharpest rise seen in private banks, technology, telecom, real estate, and healthcare. FIIs, on the other hand, reduced exposure in 17 sectors, most notably private banks, NBFCs, EMS, real estate, technology, retail, and infrastructure.

DIIs raise stakes across the board

According to Securities and Exchange Board of India categorisation, large-cap, mid-cap, and small-cap stocks accounted for 67%, 22%, and 11% of the total Nifty-500 market capitalisation, respectively.

As per the Motilal Oswal report, DIIs raised their stakes across market capitalisations, increasing exposure by 130 basis points, 260 basis points, and 190 basis points YoY, and by 40 basis points, 50 basis points, and 80 basis points QoQ, taking holdings to 22%, 19%, and 17.7% in large-, mid-, and small-caps, respectively.

Top five sectors where DIIs raised stake

As per the report, DIIs emerged as aggressive buyers across domestic-facing sectors during the year. The highest increase in DII holdings was seen in private banks, where ownership rose 420 basis points YoY, followed by technology at 400 basis points and telecom at 340 basis points. Real estate and infrastructure also saw strong accumulation, with DII stakes increasing 280 basis points and 240 basis points, respectively, while healthcare and PSU banks gained 220 basis points and 150 basis points.

Overall, the top five sectoral holdings of DIIs in the Nifty-500 accounted for 60.2% of total allocation, led by BFSI (28.2%), followed by oil & gas (8.3%), consumer (8%), technology (8%), and automobiles (7.7%).

Of the total DII holdings worth $849 billion in the Nifty-500, private banks topped the list at $129 billion, followed by oil & gas at $70 billion and technology at $68 billion.

The top five stocks by holding value were HDFC Bank ($43 billion), Reliance Industries ($40.6 billion), ICICI Bank ($37.9 billion), ITC ($28.4 billion), and State Bank of India ($25.7 billion).

Top five sectors where DIIs reduced stake

DIIs, while largely increasing allocations across sectors, reduced exposure in a few pockets, including EMS, NBFCs–non-lending, and metals. They also pared stakes in select export-oriented manufacturing companies and cyclical industrial businesses that remain vulnerable to weak global demand and commodity volatility. The trend suggests domestic investors shifted capital away from externally linked sectors and focused more on domestic growth themes.

The report noted that DIIs were underweight on private banks, NBFCs, capital goods, automobiles, real estate, and healthcare.