In a landmark shift, domestic institutional investors (DIIs) have, for the first time, surpassed foreign institutional investors (FIIs) in ownership of India's Nifty 50 index. This transition signifies a maturing Indian equity market, showcasing reduced reliance on foreign capital and the increasing influence of domestic investors.
As of December 2025, DIIs held approximately 24.8% of the Nifty 50, slightly edging out FIIs, whose ownership decreased to around 24.3%—the lowest in eight quarters. This divergence marks a significant change, as DIIs have historically trailed FIIs within the benchmark index. While FIIs remain important, their strong hold in the Indian capital market has decreased.
The rise of DIIs can be attributed to consistent inflows from systematic investment plans (SIPs), growing retail participation, and steady allocations from insurance and pension funds. The Association of Mutual Funds in India reported strong inflows from SIPs in 2025, totaling ₹3.34 lakh crore, demonstrating continued interest from Indian investors in the stock market. In November 2025, SIP inflows reached approximately ₹29,445 crore. Furthermore, the total number of folios in the mutual fund industry reached 258.6 million in November 2025, boosted by the addition of 2.61 million new folios during the month.
Conversely, FIIs have been reducing their exposure to Indian equities amidst global trade uncertainty, a strong dollar, and more attractive return opportunities in other global markets. In 2025, foreign portfolio investors withdrew $9,551 million from Indian equities, with net outflows continuing into 2026, reaching $640 million by February 9. Cumulative net FII selling in Indian equities amounted to nearly ₹9.96 lakh crore over the past five years.
Despite these outflows, the Nifty 50 has delivered returns of 72% to 75% over the same period, highlighting the crucial counterweight provided by domestic institutions. DIIs increased their stakes in 41 Nifty 50 companies year-on-year, while FIIs reduced exposure in 39. DII ownership rose by 170 basis points year-on-year and 30 basis points sequentially in the December 2025 quarter, reaching an all-time high.
This shift has broad implications for the Indian stock market. DIIs, along with retail investors and high-net-worth individuals, are now playing a strong countervailing role, with their combined share reaching an all-time high of 28% as of December 31, 2025. Consistent SIP inflows and buying from domestic institutions act as shock absorbers, helping the market defend key levels despite volatility.
The Indian stock market has shown positive momentum in early February 2026. On February 10, 2026, the BSE Sensex rose to 84437 points, a 0.44% increase from the previous session. The Nifty 50 also increased by 0.4% to nearly 26,000.
While the long-term outlook for Indian equities remains bullish, supported by strong GDP growth and improving earnings, the short-term outlook remains uncertain. Investors are likely spreading risk by investing through SIPs.
The rise of DIIs signifies a structural change in the Indian stock market, making it more resilient and less dependent on foreign investment. This trend is expected to continue as domestic participation in the equity market deepens.