India’s equity markets are witnessing a structural shift in institutional ownership, a trend that has gathered pace since 2021 amid sustained inflows from domestic institutional investors (DIIs). For the first time, DIIs have overtaken foreign institutional investors (FIIs) in their ownership of Nifty50 companies, according to a report by Motilal Oswal.

In the December 2025 quarter, DIIs held around 24.8% of the Nifty50 universe, marginally higher than FIIs, whose ownership stood at approximately 24.3%.

The data showed a steady rise in domestic ownership, with DII stakes increasing by 170 basis points year-on-year (YoY) and 30 basis points sequentially. In contrast, FII holdings declined by 90 basis points YoY and 20 basis points QoQ over the same period.

The divergence was also visible at the stock level. On an annual basis, DIIs increased their shareholding in 41 out of 50 Nifty companies, while FIIs cut exposure in 39 stocks. A similar pattern emerged sequentially, with DIIs raising stakes in 35 companies during the quarter, even as FIIs reduced positions in 33.

Himanshu Srivastava, Principal – Manager Research at Morningstar Investment Research India, said the shift underscores the growing strength of domestic capital pools. He attributed the rise in DII ownership to sustained systematic investment plan (SIP) inflows, higher retail participation, and increased allocations from insurance and pension funds, while noting that FIIs have remained cautious amid global macroeconomic uncertainty, elevated interest rates and a strong U.S. dollar.

Varun Gupta, CEO of Groww Mutual Fund, termed the development a milestone for Indian equity markets, saying it reflects the increasing maturity of retail investors and the steady financialisation of household savings. He added that consistent SIP inflows, even during phases of moderate market returns, have played a key role in reinforcing domestic investor dominance.

Domestic flows offset foreign outflows

The report noted that DIIs have emerged as key investors in the Indian equity market, investing $23.4 billion in the December 2025 quarter and $90.1 billion during calendar year 2025. The surge in domestic investments has been largely supported by steady systematic investment plan (SIP) inflows into mutual funds.

This robust domestic participation helped offset FII outflows, which stood at $18.8 billion in CY25, and also absorbed the continued momentum in primary market fundraising. IPOs and follow-on public offers collectively raised around ₹1.95 trillion during the year.

The shift in institutional ownership has been gaining traction since 2021. In the broader Nifty 500 universe, DII holdings climbed to a record 20.6% in December 2025, rising 210 basis points YoY and 60 basis points sequentially. In comparison, FII holdings stood at 18.4%, declining 50 basis points year-on-year, though marginally increasing 10 basis points quarter-on-quarter.

Promoter and retail holdings decline

Promoter ownership in Nifty 500 companies declined to an all-time low of 48.8%, falling 90 basis points YoY and 50 basis points sequentially. The drop was attributed to promoters capitalising on strong market valuations and favourable investor sentiment to pare stakes through primary market issuances.

Retail investor holdings also moderated to 12.1% in December 2025, down 60 basis points YoY and 20 basis points QoQ.

Sectoral trends show diverging strategies

Sector-wise trends indicate that DIIs expanded their holdings in 22 out of 24 sectors in the Nifty 500 on a YoY basis. The sharpest increase was seen in electronics manufacturing services (EMS), technology, telecom, retail, PSU banks, and healthcare. Sequentially, DIIs raised their exposure in sectors such as NBFCs (non-lending), private banks, capital goods, NBFC lending, and consumer sectors.

In contrast, FIIs increased their stakes in select sectors including PSU banks, telecom, oil & gas, chemicals, insurance, NBFC lending, and metals. However, FIIs reduced exposure in 15 sectors, with the most notable cuts seen in EMS, consumer durables, technology, infrastructure, retail, private banks, utilities, real estate, and consumer sectors.

As a share of Nifty 500 free float, FII ownership fell to 36%, down 160 basis points YoY, while DII ownership rose to 40.3%, increasing 340 basis points during the same period. The FII-to-DII ownership ratio remained largely stable at 0.9 times in December 2025.