DIIs invested $22.8 billion in Indian equities in Q2CY26.
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Domestic institutional investors (DIIs) continued to tighten their grip on the markets for the ninth consecutive quarter with their holding in Nifty 500 companies reaching a record 21 per cent in the June 2026 quarter, according to a note by Motilal Oswal Financial Services (MOFSL).
In contrast, foreign institutional investor (FII) holding declined to a new low of 17 per cent over the same period, the note said.
The brokerage has classified the Nifty-500 universe among private, public sector undertakings (PSU), and multi-national companies (MNC) companies.
Key Points
- Domestic institutional investors’ holding in Nifty 500 companies reached a record 21 per cent during the June 2026 quarter.
- Foreign institutional investor ownership declined to a fresh low of 17 per cent despite selective buying towards the end of June.
- Strong SIP inflows, insurance premiums and retirement fund allocations continued to fuel consistent domestic institutional buying every month.
- DIIs increased exposure to banking, telecom, healthcare, technology and real estate, while FIIs trimmed holdings across several sectors.
- Analysts expect domestic investors to remain the market’s anchor, while foreign inflows depend on global and macroeconomic developments.
Record DII Holdings
“DIIs invested $22.8 billion in Indian equities in Q2CY26, backed by the unwavering systematic investment plan (SIP) run rate.
‘Conversely, FII flows have been volatile; they turned positive in the second half of June 2026 at $1.3 billion versus net outflows of $4.3 billion in the first half of June — taking the Q2CY26 FII outflows to $13.2 billion,; the MOFSL note said.
SIP Flows Drive Buying
According to Anirudh Garg, partner and fund manager, INVasset PMS, DIIs continued to repose faith in the Indian markets even during stressful times, having bought in every single month.
This was Rs 1.43 trillion in March at the peak of the stress, Rs 51,064 crore in April, Rs 82,669 crore in May, Rs 85,800 crore in June, and Rs 32,839 crore in July.
“This is not opportunistic capital timing dips; it is mechanical monthly deployment from record SIP flows, insurance premiums, and Employee Provident Fund Organisation (EPFO) and National Pension System (NPS) allocations that arrive whether the market is up or down.
“On sustainability, the DII engine is structural rather than sentimental, because household financialisation is perhaps halfway through a multi-decade migration and monthly SIP flows have grown through every correction of the past five years,” Garg said.
Sectoral Ownership Shift
In terms of sectors, DIIs, on a year-on-year (Y-o-Y) basis, increased their holdings in private banks, telecom, real estate, tech, healthcare, insurance, automobiles, PSU banks, NBFC-lending, retail, and capital goods; electronics manufacturing services (EMS), media, metals, consumer durables, and consumer witnessed a reduction.
FII Stake Falls
On the other hand, FIIs raised stakes in metals, PSU banks, NBFC-lending, capital goods, and logistics sectors Y-o-Y.
Most significant reductions were visible in private banks, EMS, NBFC-non lending, technology, real estate, retail, automobiles, healthcare, consumer, oil & gas, insurance, cement, and utilities.
The road ahead
Going ahead, analysts expect DIIs to remain a dominant force in the Indian equity markets regardless of market direction.
“The monthly quantum will vary with how much foreign selling there is to absorb.
“The architecture is now settled: domestic flows provide the floor, foreign flows decide the pace,” Garg added.
Though the worst of FII selling, said Jyotivardhan Jaipuria, founder & managing director at Valentis Advisors, could be over, foreign investors are not in a hurry to return to Indian shores.
“FIIs are unlikely to increase their underweight position on India in any meaningful way.
“Bond yields, rupee-dollar equation, corporate earnings back home and how the artificial intelligence trade plays out will determine how the flows pan out,” he said.
Feature Presentation: Ashish Narsale/Rediff