DII surge, FII shuffle, promoter exit - Perfect storm in Indian equities

Business Standard

5 days ago

Domestic institutional investors (DIIs) are buying into Indian equities and reshaping the market's ownership map — and that shift has clear implications for retail portfolios. Motilal Oswal's latest India Strategy — Ownership note for June 2025 shows DIIs hitting all-time highs across the Nifty-500, while promoter stakes fell to record lows.
Over the past year, domestic institutional investor (DII) ownership rose by 170 basis points (bps) year-on-year (+20bps quarter-on-quarter) to reach an all-time high of 19.4% in June 2025. Foreign institutional investor (FII) ownership remained unchanged at 18.8%, showing a 20bps decline YoY but flat QoQ.
Promoter shareholding, which has historically stayed range-bound, fell sharply to an all-time low of 49.3% (-170bps YoY, -20bps QoQ). This decline was largely due to a recovery in the primary market in Q1 FY26, where high valuations and strong investor appetite encouraged several promoters to offload stakes. Retail ownership was stable at 12.4% (+10bps YoY, flat QoQ).
The quarter's net change in ownership was primarily marked by increased DII holdings, offset by a reduction in promoter stakes.
Sectoral Trends (Nifty-500):
DII Activity:
YoY: DIIs increased holdings in 20 out of 24 sectors. The largest gains were in Retail, PSU Banks, Consumer, Cement, Utilities, Private Banks, Technology, and EMS.
Sectors seeing reduced DII holdings included Infrastructure, Media, NBFC–Non-Lending, and Metals.
QoQ: Maximum increases were seen in EMS, Retail, Telecom, Technology, and Logistics.
FII Activity:
QoQ & YoY Gains: FIIs raised stakes in Infrastructure, NBFC–Non-Lending, Telecom, and Media.
YoY Declines: FIIs reduced holdings in 13 sectors, with the sharpest cuts in Utilities, Retail, Automobiles, Oil & Gas, Cement, Logistics, Consumer, Consumer Durables, Capital Goods, PSU Banks, and Healthcare.
FII-DII ownership ratio remains unchanged sequentially
FII-DII ownership ratio in the Nifty-500 stayed flat quarter-on-quarter at 1x, but the underlying shifts tell a different tale.
Foreign Institutional Investors (FIIs) trimmed their share by 150 basis points year-on-year to 37.2% of the Nifty-500's free float, with a marginal 10bp dip compared to the previous quarter. Meanwhile, Domestic Institutional Investors (DIIs) expanded their ownership by 210bp YoY to 38.3%, with a 30bp uptick QoQ.
The sectoral picture was mixed: over the past year, the FII-DII ratio expanded in Infrastructure, NBFC (Non-Lending), Media, and Telecom, but contracted in 17 out of 24 sectors.
Stock-specific trends show that FIIs reduced stakes in 53% of Nifty-500 companies over the year, while DIIs raised holdings in 74%. The divergence is sharper in the blue-chip pack—FIIs cut positions in 80% of Nifty-50 stocks, while DIIs increased their holdings in 88%.
As of June 2025, institutional and retail shareholding patterns have shifted notably:
Large-cap stocks: FII holdings dipped to a record low of 21.5%, promoter stakes fell to 47.3%, and retail holdings dropped to 10.5%—all-time lows. In contrast, DII ownership hit an all-time high at 20.7%.
Mid-cap stocks: FIIs hold 14%, DIIs 17.5%, promoters 54.3%, and retail investors 14.2%. Retail share rose 130bp year-on-year, underscoring persistent individual investor interest.
Small-cap stocks: FIIs own 12%, DIIs 15.4%, promoters 51.5%, and retail investors a robust 21%.
Key Trends:
FIIs: Trimmed large- and mid-cap stakes by 10bp YoY each but slightly increased small-cap exposure (+20bp YoY). Sequentially, they added 10bp in large-caps and 30bp in mid-caps, while cutting small-cap stakes by 10bp.
DIIs: Expanded across all market caps—up 190bp in large-caps, 170bp in mid-caps, and 40bp in small-caps YoY. Sequentially, gains continued in large-caps (+20bp) and mid-caps (+80bp) but fell slightly in small-caps (-10bp).
Promoters: Reduced holdings across all categories to historic lows—down 160bp/300bp/80bp YoY in large/mid/small caps.
Retail investors: Lowest-ever large-cap ownership (10.5%), but resilient in mid-caps and strong in small-caps (21%), reflecting a risk-on stance among individuals.
Key points to note:
DIIs increased net allocations by $19.7b in 1QFY26, while FIIs added ~$ 5.4b — a striking tilt toward domestic buying.
DII ownership in the Nifty-500 rose to 19.4% (all-time high); FII ownership stood at 18.8%. Promoter holdings slipped to 49.3%, the lowest on record. Retail holdings are ~12.4%.
FII exposure to BFSI jumped to 34.9% of their Nifty-500 allocation — a seven-quarter high — signalling sustained foreign interest in banks and financials.
Sector moves that affect your portfolio
DIIs added to 20 of 24 sectors YoY, with the biggest DII increases in Retail, PSU banks, Consumer, Cement, Utilities, Private Banks, Technology and EMS.
FIIs concentrated their buys in Infrastructure, NBFC (non-lending), Telecom and Media, while trimming exposure to Utilities, Retail, Autos and Metals.
Top stocks by FII value: HDFC Bank (USD 99.9b), ICICI Bank (USD 68.4b), Reliance (USD 48.9b), Bharti Airtel (USD 37.7b), Infosys (USD 30.6b). These names dominate foreign institution flows and thus market direction in the near term.
Within the Nifty-500 universe, Foreign Institutional Investors (FIIs) increased their stakes in 9 out of 24 sectors as of June 2025.
Top FII holdings by sector:
Private Banks – 47.6% (highest among all sectors)
Telecom – 23%
NBFC – Non-Lending – 21.3%
Real Estate – 20.2%
Technology – 19.1%
Automobiles – 18.6%
Healthcare – 18.5%
Largest YoY FII stake increases: Infrastructure (+520bp), NBFC – Non-Lending (+470bp), Telecom (+220bp), Media (+140bp), EMS (+120bp), and Chemicals (+80bp).
Top DII holdings by sector:
Private Banks – 32.9%
Consumer – 24.2%
Oil & Gas – 21.4%
Consumer Durables – 20.8%
Metals – 20.6%
Largest YoY DII stake increases: Private Banks (+190bp), PSU Banks (+280bp), Retail (+290bp), Consumer (+280bp), Cement (+250bp), EMS (+250bp), Consumer Durables (+220bp), and Utilities (+200bp).
BFSI: FII Allocation Hits Seven-Quarter High
The BFSI sector (Private Banks, PSU Banks, NBFCs, and Insurance) continues to dominate FII portfolios, with allocation rising 350bp YoY and 50bp QoQ to 34.9% of Nifty-500 – a seven-quarter high. FIIs remain overweight by 420bp compared to BFSI's 30.7% weight in the Nifty-500 index.
Following BFSI, the top FII sector allocations were:
Technology – 9.2% (down 20bp YoY, -80bp QoQ)
Oil & Gas – 7.2% (down 150bp YoY, +40bp QoQ)
Automobiles – 7.1%
Healthcare – 6.2%
Combined, the top five sectors account for 64.6% of total FII allocation.
Sequentially, FIIs increased exposure to Telecom, Oil & Gas, NBFC – Non-Lending, Capital Goods, and Automobiles, while trimming positions in Technology, Utilities, Consumer, Metals, and Healthcare.
Top FII Investments by Value:
Out of $ 914 billion in total FII holdings, the largest sectoral exposure is in Private Banks (USD 215b). The top five individual holdings account for 31% of the total portfolio value:
HDFC Bank – $99.9b
ICICI Bank – $ 68.4b
Reliance Industries – $48.9b
Bharti Airtel – $37.7b
Infosys – $30.6b
Key Takeaways for Individual Investors
1. Growth Stocks Still Have Momentum — But Valuations Matter
The report notes that while India's economic fundamentals remain strong, valuations in several growth-oriented sectors are running ahead of earnings. For long-term investors, this means balancing high-growth bets with value-oriented picks to avoid overpaying for future potential.
2. Banking & Financials Remain Core Portfolio Anchors
With credit growth healthy and non-performing loans under control, large private banks and select NBFCs continue to offer stability and steady returns. For retail investors, these can act as the 'core' holdings that balance more volatile sectors like technology and consumer discretionary.
3. Manufacturing & Capital Goods in the Spotlight
Government-led infrastructure spending and the Make in India push are creating tailwinds for manufacturing and capital goods companies. Long-term investors could consider adding exposure to these sectors via diversified mutual funds or direct equity investments in leading players.
4. IT & Pharma as Global Plays
The report highlights that while IT earnings are currently muted due to global demand softness, valuations are turning attractive. Similarly, Indian pharma continues to benefit from global healthcare demand. Both sectors could be smart contrarian bets for patient investors.
5. Mid- and Small-Cap Caution
While mid- and small-cap stocks have delivered outsized gains recently, valuations are stretched in several pockets. MOFSL suggests focusing on companies with strong earnings visibility rather than chasing momentum — a message particularly relevant for retail investors tempted by sharp short-term rallies.