Domestic institutional investors (DIIs) have overtaken foreign institutional investors (FIIs) in ownership of India’s benchmark Nifty 50 for the first time, marking a structural shift in market participation as persistent foreign selling continues amid global trade uncertainty and heightened volatility.

Data compiled by Motilal Oswal Financial Services show that, as of the December 2025 quarter, DIIs held around 24.8 per cent of the Nifty 50, marginally higher than FIIs at about 24.3 per cent, the lowest level in eight quarters. While DIIs had earlier surpassed FIIs in overall equity ownership, they had continued to trail foreign investors within the benchmark index until now.

Foreign portfolio investors have been paring exposure to Indian equities amid a weak rupee and relatively more attractive return opportunities in other global markets. In calendar 2025, foreign portfolio investors withdrew $9,551 million from Indian equities, and the selling has extended into 2026, with net outflows of $640 million recorded till February 9, according to NSDL data.

Over the past three years, rising domestic participation has provided a crucial counterweight to foreign selling, enabling the Nifty 50 to deliver a return of around 13.07 per cent despite elevated volatility in global and domestic markets.

FII holdings in the Nifty 50 declined by 90 basis points year-on-year and 20 basis points quarter-on-quarter in the December 2025 quarter. In contrast, DII ownership climbed to an all-time high, rising 170 basis points year-on-year and 30 basis points sequentially.

The divergence in positioning was broad-based across the index. On a year-on-year basis, DIIs increased their stakes in 41 Nifty 50 companies, while FIIs cut exposure in 39 constituents. On a sequential basis, DIIs raised stakes in 35 companies, while FIIs reduced holdings in 33 companies.

At the stock level, DII ownership rose the most on a year-on-year basis — by over four percentage points — in Eternal, Dr. Reddy’s Laboratories, Asian Paints, Tech Mahindra, InterGlobe Aviation, Trent, Max Healthcare Institute, Shriram Finance, Axis Bank, Bajaj Auto and Tata Consumer Products.

In contrast, FIIs raised their year-on-year holdings in select names, including Bharti Airtel, Eicher Motors, Grasim Industries, Bharat Electronics, Bajaj Finserv, Bajaj Finance, Hindalco Industries, Maruti Suzuki India, Wipro and InterGlobe Aviation.

Pranav Haldea, managing director, Prime Database Group, said that for years FIIs were the largest non-promoter shareholder category in the Indian market and their investment decisions had a disproportionate influence on market direction. “This is no longer the case. DIIs, along with retail investors and HNIs, are now playing a strong countervailing role, with their combined share reaching an all-time high of 28 per cent as on December 31, 2025. While FIIs remain an important constituent, their stranglehold on the Indian capital market has come down,” he said.

Himanshu Srivastava, principal, manager research, Morningstar Investment Research India, said DIIs overtaking FIIs in the Nifty 50 underscores a fundamental shift toward stronger domestic participation, driven by sustained mutual fund SIP inflows, rising retail participation, and steady allocations from insurance and pension funds, even as FIIs turned cautious amid global macro uncertainty, elevated overseas rates and a stronger dollar.

Varun Gupta, CEO, Groww MF, said the milestone reflects the coming of age of the retail investor, with patient, long-term capital strengthening domestic markets as rising SIP flows continue even through phases of muted return.