Domestic institutional investors (DIIs) have exceeded foreign peers in owning Indian equity markets, with their holdings in Nifty 500 companies reaching a record 20.9% in March 2026, as per a report by Motilal Oswal Financial Services Limited (MOFSL). This marks the eighth consecutive quarter of growth in DII holdings, up 170 basis points year-on-year and 50 basis points quarter-on-quarter. In contrast, foreign institutional investor holdings dropped to a new low of 17.1%, down 180 basis points over the same period, the report stated.
The FII-DII ownership ratio in the Nifty 500 has now decreased to 0.8 times, indicating a significant structural change in the control of India’s equity markets. According to MOFSL, the consistent inflow through systematic investment plans has been the key driver behind DII strength. In the first quarter of 2026, domestic institutions injected $27.2 billion into Indian equities, while foreign investors withdrew $15.8 billion, with a major portion, $14.2 billion, pulled out in March due to the escalating Iran conflict.
The report mentioned that once the situation calms down post the conflict, there is a high probability of a more favorable FII flow environment. It also highlighted that any slowdown in outflows would be seen positively by the market. DIIs increased their stakes in 21 out of 24 sectors on a year-on-year basis, with significant rises in private banks, technology, telecom, real estate, and healthcare sectors. On the other hand, FIIs reduced holdings in 17 sectors, with their allocation to the technology sector dropping to an all-time low of 7.3%.
Moreover, promoter holdings rose by 40 basis points quarter-on-quarter to 49.4%, while retail holdings saw a slight increase to 12.7%. DIIs raised their stakes in large-cap, mid-cap, and small-cap stocks to record levels, while FIIs decreased exposure across all market capitalization segments. In terms of returns, the Nifty 500 has surged about 80% in the last five years and 2.76% over the past year. Since the beginning of the US-Iran conflict, the index has experienced a marginal decline of 0.02% or 5 points, from 22,835.95 on March 2 to 22,830.75 on May 3.
