Domestic Institutions Seize Control: FIIs Cut Stakes Across 72% of Nifty50 Stocks

Domestic Institutions Seize Control: FIIs Cut Stakes Across 72% of Nifty50 Stocks​

The landscape of institutional ownership in India's mega-cap stocks is undergoing a dramatic shift. Foreign Institutional Investors (FIIs) have significantly reduced their stakes in the majority of Nifty 50 companies, while Domestic Institutions (DIIs) aggressively increased their holdings, collectively occupying the capital vacated by overseas investors.

A Motilal Oswal Financial Services report details this pronounced reversal. DII ownership in the Nifty 50 has climbed to an all-time high of 25.9%, a rise of 2.1 percentage points over the past year. Conversely, FII ownership dropped 2.4 percentage points to 22.7%, establishing a 3.2-point lead for domestic entities.

Healthcare and Pharma Stocks See Significant Ownership Transition​

The trend of capital rotation is evident across several key sectors, particularly in healthcare and pharmaceuticals. Max Healthcare Institute witnessed one of the most significant shifts. FII holdings declined sharply by 13 percentage points to 41.8%, as DII ownership surged by 12.5 percentage points to 30%.

Eternal also faced a decline in foreign stakes, with foreign ownership falling 12.3 percentage points to 32%. However, domestic institutions counterbalanced this trend, raising their stake by 10.4 points to 41%, claiming a significantly larger holding than FIIs. InterGlobe Aviation followed a similar pattern: FII ownership fell 7 percentage points to 20.3%, while DII stakes increased by 7.8 points to 31.9%.

Banking and Financial Services See Broad Reallocation​

The ownership transfer is widespread within India's private banking sector. FIIs reduced their holdings in all four private lenders featured in the Nifty 50, while domestic institutions uniformly increased their stakes across these banks.

In ICICI Bank, foreign ownership dropped 6.9 percentage points to 49.8%, as the DII stake rose by 6.6 points to 42.5%. HDFC Bank saw FII ownership fall 6.1 points to 49.6%, while the domestic holding increased by 5.2 points to 36.3%. Kotak Mahindra Bank reported a decline in FII stake of 5.5 percentage points to 25.2%, with DII holdings rising 6.5 percentage points to 37.7%. Axis Bank’s foreign ownership declined 2.7 percentage points to 43%, complemented by a 2.9 percentage-point rise in the DII stake to 42.7%.

Technology and Consumer Stocks Show Marked Shifts​

Technology stocks mirrored this pattern of institutional reallocation. FIIs reduced their holdings in Infosys by 6.4 percentage points, while DII stakes increased by 4.2 percentage points. Foreign ownership also declined significantly: Tech Mahindra fell by 4.6 percentage points, HCL Technologies by 3.5 percentage points, and Tata Consultancy Services (TCS) by 2.4 percentage points.

In contrast, domestic institutions boosted their positions in these firms: Tech Mahindra saw a gain of 4.8 points, HCL Technologies rose by 2.6 points, and TCS gained 1.5 points. Wipro was an outlier, with its FII holding rising marginally by 0.2 percentage point while the DII stake fell 2.6 points.

Sectoral Trends Highlight FII Selling in Key Areas​

At the sectoral level, foreign investors reduced holdings in 19 of the 24 Nifty 500 sectors over the last year. The largest reductions by FIIs were concentrated in private banks, electronics manufacturing services, non-lending NBFCs, technology, media, real estate, and retail.

FII gains were confined to five sectors: logistics, metals, PSU banks, lending NBFCs, and capital goods. Logistics recorded the biggest gain at 2.4 percentage points, followed by metals (1.9 percentage points) and PSU banks (1.7 percentage points). Meanwhile, DIIs increased their stake in 19 sectors, with private banks, telecom, real estate, technology, and healthcare being among the largest beneficiaries.

Broader Market Trends Signal Sustained Domestic Strength​

The ownership shift is not limited to the Nifty 50. DII holdings within the broader Nifty 500 rose for the ninth consecutive quarter, reaching a record 21% in June. FII ownership simultaneously slipped to a new low of 17%.

In terms of capital flows, foreign investors withdrew a cumulative $58 billion since the Indian market peaked in September 2024, according to the report. This contrasts sharply with domestic institutions, who invested a record $166 billion over the same 22-month period, supported by an average monthly systematic investment plan inflow of about $3 billion.

Decade Changes: A Shift from Foreign Dominance to Domestic Control​

The ownership reversal is profound when viewed over a longer horizon. Back in June 2016, FIIs held 24.4% of the Nifty50. This is significantly higher than the 13.2% held by domestic institutions at that time. A full decade later, DIIs have surpassed foreign investors, now commanding more than a quarter of India’s benchmark index.