Domestic institutional investors have achieved unprecedented market dominance, with ownership in Nifty-linked companies rising to 25.4% as of March 2026, according to Motilal Oswal. This represents the highest level on record, while foreign institutional investor ownership has declined to 22.2%, marking a multi-year low. The broader Nifty 500 universe shows similar trends, with DII ownership rising for the eighth consecutive quarter to 20.9%, while FII holdings have fallen to 17.1%, the lowest in a decade. As per Motilal Oswal, this structural shift reflects how domestic capital is increasingly replacing foreign inflows as the market's stabilising force.
Foreign investors withdrew $15.8 billion during the March quarter of CY26, including $14.2 billion in March alone, as reported by Motilal Oswal. This selling pressure was attributed to heightened global risk aversion stemming from the Iran-Israel-US conflict, which triggered fresh selling in March after a brief return of inflows in February. The FII-to-DII ownership ratio has compressed to 0.8x from 1.7x in 2016, underscoring how domestic capital is increasingly replacing foreign inflows. Domestic institutions provided strong support, infusing $27.2 billion during the same period, backed by steady SIP inflows.
Within the Nifty, DIIs raised their stakes in 82% of index constituents while FIIs cut holdings in 78% of companies over the past year, according to Motilal Oswal. Among key sectors, DII ownership in technology increased by 400 basis points year-on-year, while private banks witnessed a 420 basis point rise. Some of the biggest domestic accumulation was seen in names such as Infosys, Kotak Mahindra Bank, Tech Mahindra, Asian Paints and Dr Reddy's Laboratories, where DII holdings rose by more than five percentage points year-on-year. Foreign investors remained overweight on private banks, telecom and automobiles, but their allocation to technology fell to a record low of 7.3% in March, down 280 basis points year-on-year.
The ownership shift extends beyond large-caps, with midcap and smallcap DII ownership reaching all-time highs of 19% and 17.7% respectively, as per Motilal Oswal. Domestic institutions raised holdings in 21 out of 24 sectors in the Nifty-500 universe, with the strongest buying seen in private banks, technology, telecom, real estate, healthcare and infrastructure. FII ownership in largecaps fell to 19.3%, while DII ownership rose to a record 22%. The report suggests that for the Nifty, the bigger story may no longer be foreign flows but the growing ability of domestic money to absorb shocks, potentially making Indian equities less vulnerable to global risk-off cycles than in previous decades.
