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FII allocation in BFSI at a seven-quarter high

* Markets gain despite headwinds: The Indian equity markets staged a sharp recovery in 1QFY26 after hitting lows in Mar’25, despite navigating multiple headwinds during the period. The quarter was characterized by heightened geopolitical tensions, modest earnings prints, and weak consumption trends.

* DIIs strengthen their grip on Indian Equities: Defying the market volatility, DIIs invested USD19.7b into Indian equities, while FIIs added USD5.4b during 1QFY26. Further, sustained retail participation and record monthly SIP flows of over USD3b have propelled domestic institutional ownership to new highs. This structural shift in institutional ownership, which has gained momentum since 2021, continues to strengthen as DII holdings reach new peaks and surpass FII holdings in Nifty 500 companies.

* Promoter holdings dip: DII ownership in Nifty-500 rose 170bp YoY (+20bp QoQ) to 19.4%, whereas FII ownership remained unchanged at 18.8% (-20bp YoY and flat QoQ). Promoter holdings dropped to an all-time low of 49.3% (-170bp YoY and -20bp QoQ), while Retail holdings remained stable at 12.4% (+10bp YoY, flat QoQ) as of Jun’25.

* In this report, we delve deep into their ownership across the Nifty-500 sectors and companies, examining how their holdings have evolved.

DII holdings in Nifty-500 surge for the fifth consecutive quarter

* Over the past one year, DII ownership rose 170bp YoY (+20bp QoQ) to an all-time high of 19.4% in Jun’25, while FII ownership was unchanged at 18.8% (-20bp YoY and flat QoQ). Promoter holdings, which have historically remained range-bound, also declined meaningfully to an all-time low of 49.3% (-170bp YoY, -20bp QoQ) in Jun’25. This sharp drop was driven by a recovery in the primary market in 1QFY26, where high valuations and strong investor appetite continue to provide an attractive opportunity for several promoters to liquidate their stakes. Retail holdings were stable at 12.4% (+10bp YoY, flat QoQ) in Jun’25.

* Notably, the net shift in holdings during the quarter was primarily marked by gains in DII ownership, accompanied by a reduction in promoter stakes.

* Sectoral holding trends: Within Nifty-500, FIIs and DIIs showcased divergent trends. On a YoY basis, DIIs increased their holdings in 20 sectors (out of 24 sectors) – the top increase in holdings was seen in Retail, PSU Banks, Consumer, Cement, Utilities, Private Banks, Technology, and EMS, while sectors that experienced a reduction in holdings were Infrastructure, Media, NBFC, NonLending, and Metals. On a sequential basis, DIIs recorded the maximum increase in holdings of the EMS, Retail, Telecom, Technology, and Logistics sectors. On a QoQ and YoY basis, however, FIIs increased their stakes in Infrastructure, NBFCNon-Lending, Telecom, and Media. On a YoY basis, FIIs reduced their holdings in 13 sectors – the top reduction in holdings was observed in Utilities, Retail, Automobiles, Oil & Gas, Cement, Logistics, Consumer, Consumer Durables, Capital Goods, PSU Banks, and Healthcare.

FII-DII ownership ratio remains unchanged sequentially

* As a proportion of the free float of Nifty-500, FII ownership decreased 150bp YoY (-10bp QoQ) to 37.2%, while DII ownership increased 210bp YoY (+30bp QoQ) to 38.3%.

* The FII-DII ownership ratio in Nifty-500 remained flat QoQ (-10bp YoY) at 1x in Jun’25. Over the last one year, the FII-DII ratio has expanded primarily in Infrastructure, NBFC Non-               Lending, Media, and Telecom, while it contracted in 17 out of 24 sectors.

* Within the Nifty-500 companies, FIIs reduced their holdings in 53% of the companies YoY, while DIIs increased their stake in 74% of the companies.

* In the Nifty-50, FIIs reduced their holdings in 80% of the companies, while DIIs raised their holdings in 88% of the companies.

Analyzing the Caps: DIIs continue to raise their stakes across the board

* According to the SEBI's categorization, large-, mid-, and small-cap stocks accounted for 67%, 22%, and 11% of the total Nifty-500 market cap, respectively. ? FII, Promoter, and Retail holdings in large-caps dipped to the lowest levels of 21.5%, 47.3%, and 10.5%, respectively. In contrast, DII holdings in large-caps rose to an all-time high of 20.7% as of Jun’25.

* Analysis of institutional holding patterns: 1) FIIs reduced their stakes in largeand mid-caps by 10bp YoY each and raised their holdings in small-caps by 20bp YoY. On a sequential basis, FIIs increased their stakes across large-caps and midcaps by 10bp and 30bp QoQ, respectively while reduced 10bp QoQ for Smallcaps to 21.5%/14%/12%; 2) DIIs significantly raised their stakes across market caps by 190bp/170bp /40bp YoY (+20bp/+80bp/-10bpQoQ) to 20.7%/17.5%/ 15.4%; and 3) Promotors notably reduced their YoY holdings across market caps to an all-time low; their holdings reduced 160bp/300bp/80bp YoY and 10bp/100bp/30bp QoQ to 47.3%/54.3%/51.5% across Large-/ Mid-/Small-caps as of Jun’25; and 4) Retail holdings also dipped to all-time lows in large-caps to 10.5%; however, the holdings rose 130bp YoY (flat QoQ) in mid-caps to 14.2% and remained strong for small-caps at 21% (+10bp YoY, flat QoQ), given the higher retail participation in these categories.

PSU stocks – both DII and FII holdings moderate

* We classified the Nifty-500 universe among Private, PSU, and MNC companies. Notably, FII holdings in Private companies reduced 60bp YoY; however, the holdings rose 10bp QoQ to 20.2% in Jun’25. The FII stakes in PSUs reduced 30bp to 17.7% (+ 120bp YoY) in Jun’25. ? DII holdings in Private companies rose to an all-time high of 19.2% (up 190bp YoY/50bp QoQ), and those of PSU companies moderated 20bp QoQ to 18.6% (+120bp YoY). ? The return of buoyancy in primary and secondary markets also led to increased stake dilution by Promoter groups of private companies. This resulted in a dip in their overall holdings in Nifty-500 to an all-time low level of 46.9% (-170bp YoY/- 70bp QoQ) in Jun’25. Further, Promoter holdings in the PSU companies also increased 60bp QoQ to 54.7% (-210bp YoY).

Sector holdings YoY: FIIs gain in nine sectors, while DIIs in 20

* Within Nifty-500, FIIs increased their holdings in 9 out of 24 sectors: 1) FIIs had the highest holding in Private Banks (47.6%), followed by Telecom (23%), NBFC Nonlending (21.3%), Real Estate (20.2%), Technology (19.1%), Automobile (18.6%) and Healthcare (18.5%). Among the top sectors, FII raised their stakes in Infrastructure (+520bp), NBFC – Non-Lending (+470bp), Telecom (+220bp), Media (+140bp), EMS (+120bp), and Chemicals (+80bp) YoY. 2) DIIs had the highest holdings in Private Bank (32.9%), Consumer (24.2%), Oil & Gas (21.4%), Consumer Durables (20.8%), and Metals (20.6%). Among the key sectors, DIIs raised their stakes in both Private Banks (+190bp) and PSU Banks (+280bp), and also in Retail (+290bp), Consumer (+280bp), Cement (+250bp), EMS (+250bp), Consumer Durables (+220bp), and Utilities (+200bp) on a YoY basis.

FII allocation in BFSI at a seven-quarter high; rises for the third straight quarter

* BFSI’s (Private Banks, PSU Banks, NBFCs, and Insurance) growth continued to be reflected in FII allocation, which rose 350bp YoY/50bp QoQ to 34.9% in Nifty500 as of Jun’25 – to a seven-quarter high. FIIs remained significantly overweight (by 420bp) in BFSI vs. Nifty-500 (BFSI’s weight in Nifty-500 currently stands at 30.7%).

* BFSI was followed by Technology, in which FIIs had 9.2% weightage (down 20bp YoY and 80bp QoQ), and Oil & Gas (down 150bp YoY and up 40bp QoQ). Overall, the Top 5 sectoral allocations of FIIs in Nifty-500 accounted for 64.6% of total allocation – BFSI (34.9%), Technology (9.2%), Oil & Gas (7.2%), Automobiles (7.1%), and Healthcare (6.2%).

* On a sequential basis, FIIs raised their weights in Telecom, Oil & Gas, NBFC-Non Lending, Capital Goods, and Automobiles, while they reduced their holdings in Technology, Utilities, Consumer, Metals, and Healthcare. ? In terms of absolute holdings, out of the total FII holdings of USD914b, Private Banks topped the chart with USD215b in investment value. The top-5 companies that contributed 31% to the holding value were HDFC Bank (USD99.9b), ICICI Bank (USD68.4b), Reliance (USD48.9b), Bharti Airtel (USD37.7b), and Infosys (USD30.6b).

DIIs: UW on Private Banks and NBFCs; OW on Consumer and O&G

* Within Nifty-500, DIIs were overweight on Consumer, O&G, PSU Banks, and Metals, while they were underweight on Private Banks, NBFCs, and Real Estate.

* Overall, the Top 5 sectoral holdings of DIIs in Nifty-500 accounted for 61.4% of the total allocation – BFSI (27.5%), Consumer (9.2%), Technology (9%), O&G (8.7%), and Automobiles (7%).

* Of the total DII holdings of USD942b in Nifty-500, Private Banks topped the chart at USD149b, followed by Consumer at USD87b and Technology at USD85b. ? The top 5 stocks by holding value were HDFC Bank (USD55.8b), Reliance (USD46.6b), ICICI Bank (USD43.3b), ITC (USD42.5b), and Infosys (USD27.5b).

Retail holdings stable over the last three years

* Retail holdings for the overall Nifty-500 universe have been broadly stable over the last three years in the range of 12-13%. The holdings inched up 10bp YoY but remained flat QoQ at 12.4% as of Jun’25.

* Within Nifty-500, the Top 5 sectoral holdings of Retail accounted for 56.9% of the allocation – BFSI (24.6%), Capital Goods (10.5%), Consumer (7.6%), Automobiles (7.2%), and Technology (7%).

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