Domestic institutional investors have exceeded foreign institutional investors in owning the benchmark Nifty50 index for the first time, as per a recent report by Motilal Oswal Securities. Data reveals that domestic institutions held approximately 24.8% of the Nifty50, slightly higher than the 24.3% held by foreign investors in the December 2025 quarter. Analysts suggest that this shift signifies a structural change rather than a temporary trend, with domestic capital base deepening.
Market experts highlight the rise of domestic investors in overall equity ownership, particularly within the Nifty50 index, a domain where foreign investors had previously dominated. This shift has been attributed to significant systematic investment plan inflows, growing pension fund participation, and the entry of new asset management companies.
The surge in domestic institutional investments, including allocations from the Employees’ Provident Fund Organisation (EPFO) and insurance investments, has been a key driver of this transition. This trend is expected to persist and stabilize, rather than reverse, even in the event of a market correction. Over the past five years, domestic flows have played a crucial role in driving market growth, compensating for the cumulative selling of nearly Rs 9.96 lakh crore by foreign investors.
Foreign institutional investor holdings in the Nifty50 have witnessed a decline, with a 90 basis points decrease year-on-year and a 20 basis points drop quarter-on-quarter. In contrast, domestic institutional ownership has seen an increase of 170 basis points year-on-year and 30 basis points sequentially. Notably, during the quarter, foreign investors reduced stakes in 78% of Nifty50 constituents, while domestic institutions augmented their holdings in approximately 82% of index constituents.
In terms of asset value, domestic institutions now hold assets worth around $24.8 billion, surpassing foreign holdings valued at about $24.3 billion. Despite India’s modest market performance in 2025, with a Nifty return of 10%, the substantial DII investment of Rs 7.44 lakh crore overshadowed the total FII selling of Rs 166,283 crore. The market’s lackluster performance has been attributed to sluggish earnings growth and high valuations, with expectations that positive triggers like an India-US trade deal could potentially reverse sentiments, prompting FIIs to re-enter the market.
