Domestic investors absorb $58 bn FII selloff, emerge as biggest mkt owners

A record $166 billion of domestic institutional inflows over the past 22 months has transformed the ownership of India’s stock market. Domestic institutional investors now hold 21% of the Nifty 500—an all-time high—compared with 17% for foreign institutional investors, signalling that Indian equities are increasingly being driven by domestic rather than overseas capital, according to Motilal Oswal Financial Services.

The shift comes after domestic investors absorbed $58 billion of foreign selling over the past 22 months, signalling that Indian equities are increasingly being powered by household savings rather than overseas capital, according to Motilal Oswal Financial Services.

The milestone caps nine consecutive quarters of rising DII ownership.

From foreign money to domestic capital

For decades, FIIs were regarded as the marginal buyers that dictated the direction of Indian equities. Large foreign inflows often fuelled market rallies, while heavy selling triggered sharp corrections.

That equation is now changing.

According to the report, DIIs have invested $166 billion in Indian equities over the past 22 months, comfortably offsetting $58 billion of cumulative FII outflows. A steady stream of systematic investment plan (SIP) inflows—averaging around $3 billion every month—has emerged as a structural source of liquidity, cushioning markets from bouts of global risk aversion and reducing India’s dependence on overseas capital.

“This structural shift in institutional ownership, which has gained momentum since 2021, continues to strengthen as DII holdings scale new peaks, accounting for 21% of Nifty 500companies in Jun’26. In contrast, FII holdings declined to a new low of 17% over the same period. In 2QCY26, DIIs invested USD22.8b in Indian equities, backed by the unwavering SIP run rate. Conversely, FII flows have been volatile; although they turned positive in the second half of June 2026 at $1.3billion vs. net outflows of $4.3 billion in the first half of Jun’26 – taking the 2QCY26 FII outflows to $13.2 billion,” said the report.

Domestic investors are buying across the market

The growing dominance of domestic investors is not confined to a handful of companies.

DIIs increased their holdings in 73% of the companies in the Nifty 500 over the past year, while FIIs reduced their stakes in 59% of the index constituents. The trend is even more pronounced among blue-chip stocks, with domestic institutions raising holdings in 82% of the Nifty 50, compared with FIIs cutting exposure in 72% of the companies.

The report also shows DII ownership touching record highs across large-, mid- and small-cap stocks, suggesting that domestic flows are supporting the market across the capitalisation spectrum rather than being concentrated in a few large companies.

Where domestic money is flowing

The report also shows that domestic investors are backing India’s growth story across sectors.

DIIs increased their holdings in 19 of the 24 sectors in the Nifty 500 over the past year. The biggest increases were seen in private banks, telecom, real estate, technology, healthcare, insurance, automobiles, PSU banks, NBFC-lending, retail and capital goods. In contrast, FIIs reduced their holdings in 19 sectors, selectively increasing exposure only to metals, PSU banks, NBFC-lending, capital goods and logistics.

The broad-based nature of domestic buying suggests mutual funds and other institutional investors remain constructive on India’s long-term earnings and economic outlook despite intermittent foreign selling.

Banks remain the biggest bet

Despite differing ownership trends, both domestic and foreign investors continue to favour financial stocks.

Banking, financial services and insurance (BFSI) accounted for 34.6 per cent of FII allocations and a record 29.4 per cent of DII allocations within the Nifty 500, making it the largest sector for both investor groups. Banking, financial services and insurance (BFSI) accounted for 34.6 per cent of FII allocations and a record 29.4 per cent of DII allocations within the Nifty 500, making it the largest sector for both investor groups. For domestic institutions, automobiles, consumer stocks, capital goods and oil & gas rounded out the top sectoral allocations.

BFSI (34.6%) remained the largest sector allocation for FIIs within the Nifty 500, followed by Automobiles (8.0%), Healthcare (6.9%), Oil & Gas (6.5%) and Capital Goods (6.2%). For DIIs, BFSI (29.4%) also remained the largest allocation and touched an all-time high, followed by Automobiles (7.9%), Consumer (7.6%), Capital Goods (7.4%) and Oil & Gas (7.3%).

Key Takeaways

DII ownership in the Nifty 500 rose to a record 21%; FII ownership declined to 17%.

$ 166 billion of DII inflows offset $58 billion of FII outflows over the past 22 months.

$DIIs increased holdings in 19 of the 24 Nifty 500 sectors.

$BFSI remained the largest sector allocation for both FIIs (34.6%) and DIIs (29.4%).

$ DII ownership reached record highs across large-, mid- and small-cap stocks.

Millions of SIPs later, Indian investors have overtaken FIIs

How $166 bn from Indian investors rewrote Dalal Street’s ownership map

Point to note: DIIs increased holdings in 19 of the 24 sectors in the Nifty 500 over the past year, with the sharpest increases seen in private banks, telecom, real estate, technology, healthcare, insurance, automobiles, PSU banks, NBFC-lending, retail and capital goods.

Foreign investors, on the other hand, reduced holdings across 19 sectors, selectively increasing exposure only to metals, PSU banks, NBFC-lending, capital goods and logistics.