Domestic institutional investors (DIIs) have, for the first time, surpassed foreign institutional investors (FIIs in their ownership of the benchmark Nifty50 index, signalling a structural shift in India’s equity market landscape, according to a recent report by Motilal Oswal Securities.
As of the December 2025 quarter, domestic institutions held approximately 24.8 per cent of the Nifty50, marginally higher than the 24.3 per cent stake held by foreign investors. Analysts highlighted that FII ownership has fallen to an eight-quarter low, underscoring the growing depth and resilience of the domestic capital base.
While domestic investors had previously overtaken foreign investors in overall equity ownership, they continued to trail within the Nifty50 until the latest quarter. Market participants believe the current shift is structural rather than cyclical, driven by sustained domestic inflows and expanding participation from long-term investors.
Strong and steady systematic investment plan (SIP) inflows, which totalled Rs 3.34 lakh crore in 2025, have been a key driver of this trend. Increased allocations from pension funds, the entry of new asset management companies, and rising retail participation have further reinforced domestic ownership. In addition, investments from institutions such as the Employees’ Provident Fund Organisation (EPFO) and insurance companies have provided stability to the market and are expected to moderate rather than reverse during periods of correction.
Over the past five years, domestic inflows have played a crucial role in supporting market returns, even as foreign investors cumulatively sold nearly Rs 9.96 lakh crore worth of equities. Brokerage data showed that FII holdings in the Nifty50 declined by 90 basis points year-on-year and 20 basis points sequentially during the quarter. In contrast, domestic institutional ownership rose by 170 basis points year-on-year and 30 basis points quarter-on-quarter.
Foreign investors reduced their stakes in nearly 78 per cent of Nifty50 constituents during the quarter, while domestic institutions increased their exposure in around 82 per cent of the index stocks. In value terms, assets under custody for domestic institutions stood at roughly $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 equity performance — with the Nifty delivering returns of about 10 per cent — came despite substantial domestic institutional investments of Rs 7.44 lakh crore. This sharply outweighed total FII selling of Rs 1.66 lakh crore during the year.
Analysts attributed the subdued market returns to weak earnings growth and elevated valuations. However, they noted that positive catalysts, such as progress on an India–US trade agreement, could help revive foreign investor sentiment and potentially trigger a return of FII inflows.