Domestic institutional investors (DIIs) have overtaken foreign institutional investors (FIIs) in ownership of India’s benchmark Nifty50 index, signaling a major structural shift in the country’s equity market. The change was powered largely by sustained mutual fund SIP inflows, rising retail participation and steady investments from insurance and pension funds.
According to a report by Motilal Oswal Financial Services (MOSL), as of the December 2025 quarter, DIIs held around 24.8% of the Nifty50, marginally higher than foreign investors’ holding of about 24.3%. Meanwhile, in value terms, assets under custody for domestic institutions stood at approximately $24.8 billion, edging past FII holdings of about $24.3 billion.
This change is mainly attributable to strong incremental SIP inflows of ₹3.34 lakh crore during 2025, higher participation from long-term domestic pools such as pension funds, and the entry of new asset management companies, as foreign investors turned cautious amid global macro uncertainty, elevated overseas rates, and a stronger dollar.
In its report, MOSL said, “Domestic institutional investors have remained key bidders, pumping $23.4 billion in Q4 CY25 and $90.1 billion in CY25, aided by steady SIP inflows, which helped absorb $18.8 billion of FII outflows and primary market issuances worth. ₹1.95 trillion.
Key Facts to Know
The MOSL report highlighted that FII ownership in Indian equities has fallen to an eight-quarter low. During the December 2025 quarter, FIIs reduced their stakes in about 78% of Nifty50 constituents, while domestic institutions increased holdings in nearly 82% of index stocks, underscoring a clear divergence in investment behavior.
The shift is not limited to the benchmark index alone. MOSL noted that in the broader Nifty500 universe, DII holdings have climbed to a new peak of 20.6%, while FII ownership has remained relatively stable at around 18.4%.
The brokerage believes that any reversal in FII outflows could emerge as a key trigger for markets going ahead, but emphasized that the domestic ownership trend has been gaining momentum since 2021.
It further added that a striking aspect of 2025 was that India’s equity markets delivered relatively modest returns despite unprecedented domestic buying. The Nifty rose about 10% during the year, even as DIIs invested ₹7.44 lakh crore into equities versus the total FII selling of ₹1.66 lakh crore.
How SIP flows are reshaping Indian stock markets?
Analysts believe the growing dominance of domestic capital has important implications for market stability. With SIP inflows providing a steady and predictable source of liquidity, Indian equities are becoming less dependent on volatile foreign flows, particularly during global risk-off phases.
Commenting on the trend, Varun Gupta, CEO of Groww Mutual Fund, said, “This is a remarkable milestone for India’s equity markets. It reflects the coming of age of the retail investor, whose patient, long-term capital is increasingly strengthening domestic markets. The fact that monthly SIP flows have continued to rise even through a phase of relatively muted returns underscores both growing maturity and the ongoing financialisation of household savings,” said. Varun Gupta, CEO, Groww Mutual Fund.
He added that this trend appears structural and should further anchor the Indian markets domestically.
Meanwhile, Himanshu Srivastava, Principal – Manager Research at Morningstar Investment Research India, also noted that DIIs overtaking FIIs reflects stronger domestic capital pools, driven by SIP inflows, retail participation and insurance and pension allocations, helping reduce reliance on foreign flows and making India’s equity markets more resilient.
“The increasing dominance of domestic money provides a more stable, long-term source of liquidity, reduces reliance on volatile foreign flows, and could help cushion markets during global risk-off phases, ultimately making India’s equity market structure more resilient and aligned with domestic growth fundamentals,” he stated.
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