DIIs Raise Stakes Across Key Sectors As FIIs Reduce Exposure In Indian Equities

Domestic institutional investors (DIIs) increased their ownership across several sectors during the past year, while foreign institutional investors (FIIs) reduced exposure in a majority of sectors within the Indian equity market, according to a strategy report by Motilal Oswal Financial Services.

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The report showed that DIIs raised holdings in 21 out of 24 sectors in the Nifty-500 universe as of March 2026. The largest increase in domestic ownership was seen in private banks, technology, telecom, infrastructure, healthcare and real estate companies.

In comparison, FIIs reduced stakes in 17 sectors, including private banks, non-banking financial companies, technology, consumer-related businesses, infrastructure and real estate.

DII Ownership Touches Record High

DII ownership in Nifty-500 companies rose to a record 20.9% in March 2026, increasing 170 basis points from the previous year. The rise also marked the eighth consecutive quarter of higher domestic institutional ownership. FII ownership in the Nifty-500 declined to 17.1%, down 180 basis points year-on-year.

The report stated that DIIs accounted for 41.2% of the free float in Nifty-500 companies, compared with 33.8% held by FIIs. The ratio of FII ownership to DII ownership declined to 0.8 times during the period.

Domestic Flows Continue To Support Markets

According to the report, DIIs invested $27.2 billion during the January-March quarter of calendar year 2026.

Strong inflows through systematic investment plans supported domestic buying activity during the quarter.

FIIs, however, recorded net outflows of $15.8 billion during the same period after overseas investors turned sellers amid geopolitical tensions and global market uncertainty.

Sector Allocation Trends Shift

The report showed that FIIs lowered allocation to the technology sector to 7.3% of their Nifty-500 exposure, marking the lowest level recorded so far.

Despite the reduction, banking and financial services continued to hold the largest share in FII portfolios with a 32.1% allocation.

FIIs increased exposure in sectors such as metals, public sector banks, telecom, healthcare sector, oil and gas, utilities and logistics.

Meanwhile, DIIs remained overweight in consumer, public sector banking, telecom sectors, technology, metals and oil and gas sectors.

DII Holdings Rise Across Market Segments

Domestic institutional ownership increased across large-cap, mid-cap and small-cap stocks during the year.

According to the report, DII holdings rose to 22% in large-cap companies, 19% in mid-cap firms and 17.7% in small-cap stocks.

In the Nifty-50 index, DII ownership climbed to a record 25.4%, while FII ownership declined to 22.2%.

The report noted that investor flows are expected to remain an important factor for Indian equity markets amid continuing global uncertainty and geopolitical developments.