Data from CMIE covering over 4,000 listed companies shows that the value-based share of domestic institutional investors (DIIs) in Indian equities reached a record 18.4% in the September 2025 quarter, up from 18% in the previous quarter and 16.7% a year earlier. This marks the sixth consecutive quarter, since March 2024, that DIIs have maintained a clear lead over foreign portfolio investors (FPIs).
DIIs include mutual funds, financial institutions, banks, insurance companies, and provident and pension funds.
“This steady climb in DII ownership shows that Indian households are increasingly trusting professional fund managers with their savings,” said Ajit Mishra, senior VP, research at Religare Broking. “It reflects a maturing investment culture—systematic investing through systemic investment plans (SIPs) is replacing speculative trading. DIIs are no longer just passive absorbers of volatility; they are setting the market tone.”
It reflects how India’s deepening pool of household wealth–channelled through mutual funds, insurers, and pension schemes–is emerging as the market’s anchor, reducing dependence on volatile foreign capital.
“This shift will have implications for market stability, liquidity, and valuation cycles,” said Nikunj Saraf, CEO of Choice Wealth, a wealth and financial services provider. “As domestic funds gain clout, India’s equity market could become less sensitive to global risk-off events and more aligned with domestic macro fundamentals.”
Domestic surge
The inflexion point came in Q4FY24, when DII ownership (16.56%) first surpassed that of FPIs (16.23%), breaking a long-standing pattern. Just a quarter earlier, FPIs held a narrow lead at 16.48% versus DIIs’ 16.31%. Since then, the gap has steadily widened in favour of domestic investors.
In contrast, FPI ownership slipped 40 basis points sequentially to 15.6% in Q2FY26–its lowest in several quarters and well below the record 20.1% in Q3FY21.
Saraf said the market’s resilience during the October 2024 FPI selloff underscored this shift: “When FPIs pulled out nearly ₹1 trillion, our markets barely flinched because ₹1.07 trillion of domestic money stepped in, absorbing the shock like a sponge. For the first time in 15 years, Indian mutual funds and pension schemes, not foreign investors, are calling the shots. This transition from hot money to steady money represents market maturation. India’s equity market is finally being run by Indians for Indians.”
In value terms, DIIs held ₹83 trillion in equities as of the September 2025 quarter, about 18% higher than the ₹70.3 trillion held by overseas investors.
During the September 2025 quarter, DIIs invested ₹2.2 trillion in equities, up from ₹1.7 trillion in Q4FY25, according to Bloomberg data. These inflows came despite a 4% decline in the benchmark Sensex during the period, suggesting that steady domestic investments helped cushion the market amid global volatility. This trend has persisted, with DIIs investing ₹53,401 crore in October and another ₹4,719 crore so far in November.
Experts emphasize that this is a structural rather than cyclical trend, lending it greater long-term significance. That durability stems from a broader shift in household behaviour.
“India’s savings story is undergoing a generational shift,” noted Anchal Kansal, senior advisory manager at Green Portfolio PMS. “Households are borrowing more and parking less money in traditional bank deposits, signalling a move away from conservative saving habits. Fixed deposits no longer feel rewarding, and riskier assets like equities, mutual funds, and property are taking centre stage. The market’s pulse is now driven by domestic investors—not foreign flows,” she added.
FPIs still matter
The rise in DII ownership underscores their growing role in market stability, but it doesn’t make overseas investors irrelevant. The value of FPI holdings fell to ₹70.3 trillion in Q2FY26, from ₹77.6 trillion a year earlier.
FPIs turned net sellers in Q1FY26, offloading Indian equities worth ₹76,619 crore. After brief net purchases of ₹14,610 crore in October, they have again turned cautious, pulling out ₹9,519 crore so far in November, data from NSDL shows.
Analysts attribute the persistent outflows to rising US bond yields, a stronger dollar, and geopolitical uncertainty prompting reallocations toward developed markets.
“Despite these changes, FPIs remain an important component of the market. While promoters and the government control around 50% of shares that rarely trade, FPIs still hold the majority of the active market segment,” says Sachin Jasuja, head of equities and founding partner, Centricity WealthTech. “This active segment is essential for maintaining market momentum. Although DIIs have been buying, subdued market returns emphasize the importance of FPI flows for achieving further upward trends.”
Other moves
Ownership among other investor classes – retail and promoter groups – remained broadly stable during the September quarter.
Retail investors, defined as those with holdings up to ₹2 lakh, held a 7.53% share in Q2FY26, down marginally from 7.61% a quarter earlier. The value of these holdings stood at ₹34 trillion, compared with ₹36.8 trillion a year ago.
Promoter ownership edged up to 50.13% in Q2FY26 from 50.07% in Q1FY26, remaining near the 50% mark through FY26, though slightly below 51.21% a year ago. In value terms, promoter holdings declined to ₹226.7 trillion from ₹243.5 trillion over the same period.
“Promoter holding remains a key confidence metric,” said Kansal. “A higher stake signals conviction in long-term value. The slight uptick in promoter holdings alongside retail moderation shows valuation froth is easing.”
Retail investors aren’t exiting, they’re re-allocating via SIPs, she noted, and promoters buying back stakes indicates renewed belief in fundamentals.
Mishra from Religare said the recent dip in retail activity and minor rise in promoter holdings suggest healthy consolidation, not weakness. “After a strong retail run, investors are turning selective–favouring SIPs and mutual funds over quick trades. This marks a maturing investor base focused on long-term wealth creation, setting the stage for steadier, more sustainable retail participation ahead.”
