Domestic institutional investors (DIIs) have surpassed foreign institutional investors (FIIs) in ownership of Nifty 500 stocks for the first time in the January-March quarter, signifying the rising importance of capital markets among homegrown asset management companies, insurance companies, banks and other domestic financial institutions.

Data compiled by Motilal Oswal Financial Services shows that FII holdings slid to a low of 18.8 per cent against 22.8 per cent in March 2015, while DII holdings surged to an all-time high of 19.2 per cent against 10.8 per cent in March 2015 (see chart).

Within the Nifty-500, FIIs and DIIs showcased divergent trends. On an annual basis, DIIs increased their holdings in 18 sectors (out of 24 sectors) — the top increase in holdings was seen in banks (private and PSU), consumer durables, insurance, utilities, technology, cement, oil & gas, automobiles, and retail. In contrast, FIIs experienced a decline in all these sectors, except technology and consumer durables.

Promoter holdings, which have historically remained range-bound, also declined by 140 basis points year on year to an all-time low of 49.5 per cent in March 2025. “The sharp drop was driven by a buoyant primary market in 2024, where high valuations and strong investor appetite provided an attractive opportunity for several promoters to liquidate their stakes,” said the Motilal Oswal Financial Services report.

Public sector firms garnered interest. FII holdings in private companies reduced to an all-time low of 20.1 per cent, while their stakes in PSUs rose to 18.1 per cent in March 2025. DII holdings in both private and PSU companies rose to all-time highs of 18.7 per cent and 18.8 per cent, respectively.

“This increased domestic participation has contributed to a more resilient market. Earlier, in October 2008, when foreigners sold ₹16,000 crore in equities, the market dropped 25 per cent. But now, even when they sold ₹87,000 crore this January — the Nifty barely moved, dropping only 2–3 per cent, showing how resilient we are,” said Amit Jain, co-founder of Ashika Global Family Office Services.

“There is a possibility that over the longer term, valuations become stretched due to the continuous buying by DIIs. But India has always traded at a premium,” said Jain.