Foreign investors logged their largest-ever monthly outflow as the Nifty cracked 11.3%, but domestic institutions absorbed the blow with $15.4bn of buying. JM Financial’s March flow tracker shows FII ownership at a 13-year low — and India’s MSCI weight quietly slipping.
The tug-of-war between foreign and domestic money hit a new extreme in March. Foreign institutional investors (FIIs) pulled a net USD 13.6bn out of Indian equities — the heaviest monthly outflow on record in absolute terms — even as domestic institutional investors (DIIs) stepped in with USD 15.4bn of buying, according to JM Financial’s latest FII Monthly Flow Tracker. The result: a brutal 11.3% month-on-month fall in the Nifty, following a 0.6% dip in February.
For anyone tracking who really owns India, the March data tells a structural story, not just a panic-selling one.
The Record Outflow, Broken Down
FIIs turned net sellers to the tune of INR 1,261.9bn in March, flipping from net buyers in February. The split between the two markets is telling: the primary market still drew net FII inflows of INR 30bn (versus INR 42bn in February), while the secondary market bled net FII outflows of INR 1,292bn — a sharp reversal from the INR 117bn of inflows it saw the month before. In short, foreigners kept backing fresh issuance even as they aggressively exited the open market.
Zoom out to twelve months and the same pattern holds. As JM Financial put it, “Indian primary markets have seen FII net inflows of INR 708bn (USD 8bn) whereas secondary markets logged FII net outflows of INR 2,664bn (USD 29.3bn).”
The flows feed a longer trend. FII ownership as a share of total Indian equities has fallen from 19.9% in March 2016 to 15.2% in March 2026 — its lowest level since June 2012. DII ownership, meanwhile, has climbed steadily to 18.3% as of December 2025. The crossover that markets debated for years is now firmly entrenched: domestic money is the dominant marginal buyer. FII equity assets under custody dropped to INR 62.5tn at end-March, 13% lower than February’s INR 71.8tn.
Where the Selling Hit Hardest
March’s outflows were broad. The biggest hits landed on BFSI (USD 6,488mn), Auto (USD 1,333mn), Telecom (USD 602mn), FMCG (USD 579mn), Realty (USD 501mn), Pharma (USD 497mn) and Oil & Gas (USD 443mn). Capital goods stood alone as the only sector to attract FII inflows, at USD 343mn.
Yet the top of the ownership table barely moved. BFSI, Auto, Oil & Gas, Pharma and Capital goods remained the five largest FII holdings, together making up roughly 60% of FII assets in India. BFSI still commands the largest slice at 30.5% of FII assets under custody, though down from 32.4% in February; O&G, Pharma and Capital goods all saw their shares rise sequentially.
India’s Global Weight Slips
The backdrop is a fading index footprint. India’s weight in the MSCI Emerging Markets Index eased to 12.6% in March, from 12.8% in February — and well below the 18.5% it held in March 2025.
March was a stress test, and domestic institutions passed it — outbuying a record foreign exit almost rupee for rupee. But with FII ownership at a 13-year low and India’s MSCI weight drifting down, the question for the months ahead is less about whether DIIs can keep absorbing the selling, and more about what finally tempts foreign money back.