DIIs' stake in Nifty 500 hits record 21%; FIIs' share falls to 17%: Motilal Oswal

Domestic institutional investors (DIIs) have further tightened their grip on Indian equities, with their ownership in the Nifty 500 rising to an all-time high of 21%, while foreign institutional investors' (FIIs) stake declined to 17%, according to the latest India Strategy report by Motilal Oswal Financial Services. 

The report said this marks the ninth consecutive quarter of rising DII ownership, underscoring the increasing influence of domestic investors in India's equity markets. 

According to the brokerage, sustained domestic inflows have comfortably absorbed cumulative FII outflows of $58 billion over the past 22 months. During the same period, DIIs invested a record $166 billion, supported by resilient systematic investment plan (SIP) inflows averaging around $3 billion per month, helping stabilise markets despite persistent foreign selling. 

The report noted that the shift in ownership has been broad-based across sectors. DIIs increased their holdings in 19 of the 24 sectors in the Nifty 500 over the past year, with the sharpest gains in private banks, telecom, real estate, technology, healthcare, insurance, automobiles, PSU banks, NBFC lending, retail, and capital goods. 

In contrast, FIIs reduced their holdings in 19 sectors, while selectively increasing exposure to metals, PSU banks, NBFC lending, capital goods, and logistics. 

Financials continued to dominate institutional portfolios. Banking, financial services and insurance (BFSI) accounted for 34.6% of FII holdings in the Nifty 500, followed by automobiles (8%), healthcare (6.9%), oil & gas (6.5%), and capital goods (6.2%). 

For DIIs, BFSI remained the largest allocation at an all-time high of 29.4%, followed by automobiles (7.9%), consumer (7.6%), capital goods (7.4%), and oil & gas (7.3%). 

The report also highlighted that the trend spans all market capitalisation segments. DII ownership climbed to record highs across large-, mid- and small-cap stocks, while FII ownership moderated across all three segments. 

Within the Nifty 500, DIIs increased their holdings in 73% of constituent companies, whereas FIIs reduced their stakes in 59%. In the Nifty 50, DIIs raised their holdings in 82% of stocks, while FIIs cut exposure in 72% of the index constituents, reflecting the continued shift in market ownership towards domestic investors.