India Strategy : Ownership analysis - DIIs hold the fort by Motilal Oswal Financial services Ltd
FII & DII allocations rise in Internet & New-Age Tech, but moderate in Consumer
* Flow dynamics – FII flows remain volatile: Over the past two years, institutional sentiment and positioning in India’s secondary market have diverged sharply. While FIIs have sharply stepped up selling in response to adverse global events and news flow, DIIs have remained active buyers, consistently stepping in with strong inflows to absorb the selling pressure. Despite their continued selling in the secondary market, FIIs have increasingly channeled capital into the primary market, indicating a growing preference for emerging investment themes. Given the stark divergence in positioning and the challenging global macro backdrop, we expect these contrasting flow patterns to persist in the near term.
* DIIs consolidate their control; anchor equities: Defying market volatility, DIIs invested USD17.7b into Indian equities, while FIIs added USD0.7b during 2QFY27. Sustained retail participation and record monthly SIP inflows of ~USD3.4b have further strengthened domestic institutional ownership. This structural shift in institutional ownership, which has gained momentum since 2021, continues to deepen, with DII ownership of Nifty 500 stocks reaching a record 21.3% in Sep’26. In contrast, FII holdings declined to a new low of 16.8% over the same period.
* In this report, we explore their ownership across the Nifty-500 sectors and companies, tracing shifts in their holdings and investment preferences over time.
Nifty-500: DII holdings rise for the tenth consecutive quarter
* Over the past one year, DII ownership rose 120bp YoY (+30bp QoQ) to an all-time high of 21.3% in Sep’26, while FII ownership dipped 170bp YoY (-20bp QoQ) to 16.8% (from 18.5% in Sep’25).
* Promoter holdings, which have historically remained range-bound, experienced a dip of 20bp QoQ (+10bp YoY) to 49.2% in Sep’26.
* Retail holdings declined 10bp QoQ to 12.6% in Sep’26 (+30bp YoY).
* Sectoral holding trends: Within the Nifty-500, FIIs and DIIs showcased divergent trends. On a YoY basis, DIIs raised their holdings in 20 out of 28 sectors, while FIIs reduced their holdings in 21 sectors.
* The FII-DII ownership ratio in the Nifty-500 remained flat QoQ at 0.8x in Sep’26 (-10bp YoY). Over the last year, the FII-DII ratio expanded primarily in PSU Banks, Metals, and Logistics, while it contracted in 23 out of 28 sectors
Analyzing the Caps: DIIs continue to raise their stakes across the board
* According to SEBI's categorization, large-, mid-, and small-cap stocks accounted for 65%, 23%, and 12% of the total Nifty-500 market cap, respectively.
* DIIs significantly raised their stakes across market caps to an all-time high as of Sep’26. In contrast, FIIs have reduced their holdings across market caps YoY.
* Among Nifty-500 companies, FIIs reduced their holdings in 56% of the companies YoY, while DIIs increased their stakes in 69%.
* In the Nifty-50, FIIs reduced their holdings in 70% of the companies, while DIIs raised their holdings in 82% of the companies.
DII allocations in New-Age Tech climb, while moderating in Banks
* Within the Nifty-500, DIIs were overweight in Consumer, Internet & New-Age Tech, Oil & Gas, PSU Banks, Telecom, Insurance, and Metals, while they were underweight in NBFCs, Private Banks, Retail, Utilities, Healthcare, Real Estate, Capital Markets, and Infrastructure. DII allocation in BFSI moderated to 28.5% in Sep’26 (-60bp QoQ, +130bp YoY) in Sep’26.
* On a sequential basis, DIIs raised their weights in Internet & New-Age Tech, Technology, Automobiles, Healthcare, Metals, and Insurance, while they reduced their weights in Consumer, Banks (Private & PSU), NBFCs, Oil & Gas, Capital Goods, and Utilities.
* On a YoY basis, DIIs raised their weights in Healthcare, Internet & New-Age Tech, Capital Markets, Capital Goods, Metals, Telecom, Private Banks, and Automobiles, while they reduced their weights in Consumer, Technology, Oil & Gas, Cement, and Consumer Durables.
* Overall, the Top 5 sectoral holdings of DIIs in the Nifty-500 accounted for 57.7% of the total allocation – BFSI (28.5%), Automobiles (8.1%), Consumer (7.1%), Oil & Gas (7%), and Healthcare (7%).
FII allocations in BFSI dip, while those in New-Age Tech and Healthcare climb
* FII allocation in BFSI (Banks, Capital Markets, Insurance, and NBFCs) moderated to 33.1% (-130bp QoQ, -120bp YoY) in the Nifty-500 as of Sep’26. FIIs remained overweight (by 340bp) in BFSI vs. the Nifty-500 (BFSI’s weight in the Nifty-500 currently stands at 29.8%).
* BFSI was followed by Automobiles, in which FIIs had an 8.1% weighting (+20bp QoQ and -10bp YoY). In the Healthcare sector, FIIs had a weightage of 7.4% (+60bp QoQ and +130bp YoY). The Oil & Gas sector had a weightage of 6.2% (- 20bp QoQ and -60bp YoY). The Technology sector had a weightage of 5.7% (+60bp QoQ and -160bp YoY). Overall, the Top 5 sectoral allocations of FIIs in the Nifty-500 accounted for 60.5% of their total allocation.
* On a sequential basis, FIIs raised their weights in Internet & New-Age Tech, Healthcare, Technology, Metals, Real Estate, and Automobiles, while they reduced their weights in Private Banks, Utilities, Consumer, Capital Goods, Capital Markets, Oil & Gas, NBFCs, and Telecom.
* In terms of absolute holdings, of the total FII holdings of USD717b, Private Banks topped the chart with USD144b in investment value.
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