Dalal Street’s Power Shift: Domestic investors overtake FIIs in Nifty50

Domestic institutional investors (DIIs) have overtaken foreign institutional investors (FIIs) in ownership of India’s benchmark Nifty50 index for the first time, marking a structural shift in market participation amid sustained foreign selling and rising global uncertainty, according to a recent report by Motilal Oswal Securities .

As of the December 2025 quarter, DIIs held around 24.8 per cent stake in the Nifty50, marginally higher than FIIs, whose ownership slipped to about 24.3 per cent — the lowest level in eight quarters, the brokerage said. While DIIs had surpassed FIIs in overall equity ownership earlier, they had consistently trailed foreign investors within the Nifty50 until now.

“This crossover underscores the growing dominance of domestic capital in India’s equity markets, especially at a time when foreign investors remain cautious due to global trade uncertainties, currency pressures and elevated volatility,” Motilal Oswal said in its ownership analysis.

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Persistent FII selling, domestic money steps in

FIIs have been steadily trimming their exposure to Indian equities, weighed down by a weakening rupee and relatively more attractive return opportunities in other global markets. In contrast, rising flows from domestic mutual funds, insurance companies and pension funds have helped absorb foreign selling pressure.

Over the past five years, this growing domestic participation has played a crucial role in supporting market valuations. Despite cumulative FII net selling of nearly Rs 9.96 lakh crore during this period, the Nifty has delivered absolute returns of about 72–75 per cent, the report noted .

In value terms, assets under custody for DIIs stood at around $24.8 billion, edging past FII holdings of approximately $24.3 billion within the Nifty50 universe, highlighting the narrowing gap — and eventual reversal — between the two investor classes.

Domestic stocks show power

At the stock level, Motilal Oswal pointed out that DII ownership rose the most on a year-on-year basis — by over four percentage points — in companies such as 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.

“These increases suggest stronger domestic conviction in large, liquid names across consumption, healthcare, financials and industrials,” the brokerage said.

FIIs, meanwhile, selectively raised their year-on-year holdings in a narrower set of stocks, including Bharti Airtel, Eicher Motors, Grasim Industries, Bharat Electronics, Bajaj Finserv, Bajaj Finance, Hindalco Industries, Maruti Suzuki India, Wipro and InterGlobe Aviation, indicating a more stock-specific and cautious approach.

Structural shift likely to endure

Motilal Oswal believes the rise of domestic investors is not a cyclical phenomenon but a structural one, driven by increasing financialisation of household savings, steady SIP inflows and deeper participation from long-term domestic institutions.

“With domestic flows now acting as the primary market anchor, India’s equity markets appear better positioned to withstand bouts of foreign volatility,” the report said, adding that DIIs are likely to remain the dominant force in market ownership going forward, even as FII flows turn more selective.

The shift, analysts say, could have lasting implications for market stability, valuation support and sectoral leadership in the years ahead.