Over the past decade, the Indian stock market has witnessed a significant shift in ownership, driven by a surge in retail participation. As more investors move away from traditional bank deposits to capitalise on India’s growth story, domestic institutional investors (DIIs)—primarily powered by mutual funds — have emerged as dominant players.
This transformation is reflected in the sharp rise in demat account openings and the steady inflows into mutual funds. In fact, the inflows have occasionally been so strong that fund managers have had to delay deployments to manage liquidity effectively.
These domestic inflows have also helped cushion the Indian stock market from foreign investor outflows, thereby reducing the overall impact on market stability — a trend that has become more apparent in recent times.
DIIs invested 3.7 times more than FII inflows in equities
The steady inflows from DIIs have surpassed FIIs in ownership for the first time in the March quarter. According to a recent report by domestic brokerage firm Motilal Oswal, DIIs have invested USD 195 billion over the past decade—more than 3.7 times the FII inflows of USD 53 billion during the same period.
These inflows, the brokerage notes, have also contributed to a significant shift in institutional holdings across India Inc., with DII holdings exceeding FII holdings in Nifty-500 companies for the first time in Q4FY25.
Motilal Oswal highlights that over the past year, DII ownership rose by 160 basis points year-on-year (YoY) to an all-time high of 19.2% in March 2025, up from 17.6% in March 2024. In contrast, FII ownership fell by 40 basis points YoY to an all-time low of 18.8%, compared with 19.2% in March 2024.
The brokerage also noted a divergent trend in sector-wise holdings. On a YoY basis, DIIs increased their exposure in 18 of 24 sectors—with the highest increases seen in Banks (Private & PSU), Consumer Durables, FMCG, Insurance, Utilities, Technology, Cement, Oil & Gas, Automobiles, and Retail.
On the other hand, FIIs reduced their holdings in nearly all these sectors, except technology and consumer durables. On a quarter-on-quarter (QoQ) basis, DIIs raised their stakes in most sectors, except NBFCs (non-lending), consumers, logistics, and media. FIIs, meanwhile, trimmed their holdings in most sectors, with the exception of telecom, NBFCs, chemicals, insurance, and media, which saw an increase.
FII-DII ownership ratio continues to shrink
As a proportion of the free float in the Nifty-500, FII ownership declined by 190 basis points YoY to 37.3%, while DII ownership rose by 220 basis points YoY to 38%.
The FII-DII ownership ratio in the Nifty-500 narrowed by 10 basis points YoY (flat QoQ) to 1x in March 2025. The brokerage noted that over the past year, the ratio has expanded in sectors such as NBFC (non-lending), EMS, infrastructure, telecom, and media, while contracting in 15 out of 24 sectors.
It also pointed out that FIIs reduced their holdings in 48% of Nifty-500 companies YoY, while DIIs increased their holdings in 67% of them. Within the Nifty-50, FIIs lowered their stakes in 82% of companies, whereas DIIs raised theirs in 84%.
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