FII ownership falls to 14.7% as DIIs hit 19.24%

A steady ownership shift is reshaping Indian equities

Foreign investors are steadily reducing their share in Indian equities, while domestic institutions are taking a bigger role in market ownership, according to JM Financial’s Fundamental Research report. The change is visible both at the index level and across sectors where foreign flows have remained negative for long stretches. At the same time, domestic institutional investors (DIIs) have increased allocations as systematic inflows into mutual funds stay steady. The result is a market where foreign selling is being absorbed more consistently by domestic buyers than in previous cycles.

This shift also shows up in ownership data tracked by Prime Database, which points to foreign ownership near a 14-year low and DII ownership at record highs as of March 2026. Alongside institutions, direct ownership by individual investors has slipped, suggesting that a larger part of household participation is moving through mutual funds rather than direct stock picking.

FII ownership hits the lowest level since 2012

JM Financial said FII ownership in Indian equities fell to 14.7% in April 2026 from 19.9% in April 2016. The report described this as the lowest level since June 2012. The decline reflects a prolonged phase of net selling across many Nifty stocks and sectors over the last few years.

Separate ownership data cited from Prime Database also shows foreign investor ownership at 16.13% in March 2026, a 14-year low, compared with a peak of 20.70% in March 2015. While the percentage share has fallen, the data points to a clear change in who is setting the marginal flow in the market during periods of foreign risk-off.

DIIs rise on the back of SIP-led mutual fund buying

JM Financial noted that DII ownership rose to 18.9% in April 2026, reflecting a stronger domestic bid. The report attributed a large part of this to domestic mutual funds, whose holdings have reached record highs due to steady Systematic Investment Plan (SIP) inflows. As foreign investors pulled money out, domestic institutions largely filled the gap.

Prime Database data adds detail to this trend. DII ownership reached a new high of 19.24% in March 2026. Mutual funds alone rose to a record 11.46% ownership, described as their highest ever and ahead of direct retail ownership.

Domestic institutions absorbed FII selling across Nifty stocks

At the stock level, JM Financial said DIIs increased their holdings in 39 out of 41 Nifty stocks where FIIs sold. Over the last three years, FIIs were net sellers in 41 out of 50 Nifty-50 stocks, pointing to a broader reduction in India exposure. This pattern suggests the market has increasingly relied on domestic institutional flows to maintain ownership stability when FIIs exit.

The implication is not that foreign participation has disappeared, but that the immediate impact of foreign selling is being moderated by domestic buying. It also implies that price discovery during large selling phases may depend more on how domestic institutions respond than in earlier periods when foreign ownership was higher.

Sector flows show heavy selling in index-heavy pockets

JM Financial’s 12-month FII flow data shows selling as the dominant theme, with 10 out of 16 sectors recording net outflows. The sharpest outflows were in IT (-USD 9,222 million), BFSI (-USD 6,056 million) and FMCG (-USD 3,744 million). The report noted these sectors collectively account for a disproportionate share of Nifty weightage, helping explain why index-level FII ownership has declined steadily.

March 2026 was especially tough for BFSI, which alone saw USD 6,488 million in outflows during the month. The IT sector also faced regular selling almost every month, with no major recovery during the period, according to the report.

Rotation toward selective, “globally comparable” sectors

JM Financial described a sectoral shift where FIIs are moving toward earnings-resilient, globally comparable sectors such as Communication Services and Healthcare, and away from domestic consumption, commodities, and rate-sensitive financials. Even within a broader selling phase, this framing highlights that foreign flows have not been uniformly negative across the market.

One pocket that stood out was Capital Goods, which saw inflows of USD 2,894 million over the period covered in the report, indicating confidence linked to manufacturing and infrastructure themes.

April 2026 inflows: Power and Capital Goods lead

Despite sustained selling in several sectors, April 2026 saw FIIs add exposure to a few areas. Power led with USD 584 million of FII inflows, followed by Capital Goods at USD 455 million and metals at USD 126 million. These were among the clearer signs of selective buying during a period when overall positioning has been reducing.

The mix also matters for index performance. Heavy outflows in high-weight sectors like IT and BFSI can depress index-level foreign ownership even if FIIs are buying smaller-weight sectors.

Stock-level moves: cuts in KPIT, Axis Bank, Patanjali Foods

JM Financial highlighted sharp FII stake reductions in KPIT Technologies (-12.9%), Axis Bank (-11.7%), and Patanjali Foods (-10.9%). At the same time, FIIs increased stakes selectively in 360 ONE (+22.8%), GE Vernova T&D (+17.8%), and One 97 (+7.9%).

The report also noted that some companies with strong earnings growth are seeing heavy FII selling, suggesting foreign exits are not being driven only by earnings. That observation is important because it points to allocation, risk and positioning decisions playing a role alongside company fundamentals.

Prime Database snapshot: DIIs overtake FPIs as retail slips

Prime Database data shows DIIs at 19.24% ownership as of March 2026, ahead of foreign investors at 16.13%. Individual investors (retail and HNIs) fell to a five-year low of 9.11% in March 2026, down from 9.28% in December 2025. Within this, retail ownership fell from 7.25% to 7.12%, while HNI ownership slipped from 2.03% to 1.99%.

It also said DIIs, along with retail investors and HNIs, together owned 28.34% of the market as of March 2026. Mutual funds continued narrowing the gap with foreign investors, with the gap shrinking by 83 basis points in the quarter to 4.67% by March 2026, versus 9.34% in December 2023 and 17.14% in March 2015.

Key data table: ownership and flow indicators

Sector flow table: where foreign money exited and entered

Why this matters for investors and market behaviour

This ownership transition changes how Indian markets digest global risk events. When foreign investors sell heavily in index-heavy sectors, domestic institutions can reduce immediate pressure by buying, as JM Financial’s Nifty stock-level data suggests. But the sector composition of flows still matters because sustained selling in high-weight sectors like IT and BFSI can influence index ownership trends and sentiment.

The Prime Database data also highlights a shift in household participation. With individual ownership slipping while mutual fund ownership rises, more retail money appears to be routed through professionally managed vehicles rather than direct holdings. That can influence trading patterns, sector allocation and the stability of flows, especially during volatile periods.

Conclusion: a market increasingly driven by domestic institutions

Data from JM Financial and Prime Database points to a clear shift: foreign ownership is down to multi-year lows, while domestic institutional ownership is at record highs. Sector flows show FIIs have been consistent sellers in several index-heavy sectors, while still allocating selectively to areas like Capital Goods and, in April 2026, Power. The next set of ownership disclosures and fund flow data will be closely watched to see whether this pattern persists and whether mutual funds continue narrowing the ownership gap with foreign investors.