Domestic institutional investors (DIIs) have, for the first time, overtaken foreign institutional investors (FIIs) in ownership of the benchmark Nifty50 index, according to a report by Motilal Oswal Securities.
Data showed that as of the December 2025 quarter, domestic institutions held around 24.8 per cent of the Nifty50, marginally higher than foreign investors, who owned about 24.3 per cent.
Analysts noted that FII ownership has fallen to an eight-quarter low, reflecting a deepening domestic capital base. They described the shift as structural rather than cyclical, driven by sustained local inflows rather than short-term market conditions.
While domestic investors had previously surpassed foreign investors in overall equity ownership, they continued to trail FIIs within the Nifty50 until the latest quarter.
Market observers attributed the shift to strong incremental systematic investment plan (SIP) inflows of Rs 3.34 lakh crore in 2025, rising participation from pension funds, and the entry of new asset management companies.
Additionally, steady domestic institutional investments from entities such as the Employees’ Provident Fund Organisation (EPFO) and insurance companies have supported this trend and are expected to moderate, rather than reverse, during any market correction.
Over the past five years, domestic flows have helped sustain robust market returns, even as foreign investors cumulatively sold nearly Rs 9.96 lakh crore worth of equities, analysts said.
The brokerage data showed that FII holdings in the Nifty50 declined by 90 basis points year-on-year and 20 basis points quarter-on-quarter, while domestic institutional ownership increased by 170 basis points YoY and 30 basis points sequentially.
Foreign investors reduced stakes in about 78 per cent of Nifty50 constituents during the quarter, whereas domestic institutions raised their holdings in nearly 82 per cent of index stocks.
In value terms, assets under custody for domestic institutions stood at approximately $24.8 billion, edging past foreign holdings of about $24.3 billion.
A notable feature of market behaviour in 2025 was that India’s relatively modest performance last year – with the Nifty gaining 10 per cent – came despite massive DII investments of Rs 7.44 lakh crore, which far exceeded total FII selling of Rs 1.66 lakh crore.
Analysts attributed the subdued returns to weak earnings growth and elevated valuations, adding that positive triggers – such as a potential India-US trade deal – could revive foreign investor sentiment and lead to a return of FII inflows.
(IANS)
