Foreign investors are steadily reducing their holdings in Indian equities, while domestic investors are stepping in more aggressively than ever, reshaping the ownership structure of the stock market, according to a JM Financial Fundamental Research report.
Ownership Shift Accelerates
Foreign institutional investor (FII) ownership in Indian stocks declined to 14.7% in April 2026, down from 19.9% in April 2016, marking the lowest level since June 2012. In contrast, domestic institutional investor (DII) ownership rose to 18.9%, reflecting the growing dominance of Indian institutions in the market.
The report attributes this shift primarily to domestic mutual funds, whose holdings have reached record highs due to sustained inflows through Systematic Investment Plans (SIPs).
Domestic Institutions Absorb Foreign Exits
As foreign investors pulled out capital, domestic institutions largely filled the gap. DIIs increased their stakes in 39 out of 41 Nifty stocks where FIIs reduced holdings, indicating consistent absorption of foreign selling. Over the past three years, FIIs were net sellers in 41 of the 50 Nifty-50 stocks, signaling a broad reduction in India exposure.
The report noted, "The 12-month FII flow data reveals a market where selling has been the dominant theme, with 10 out of 16 sectors recording net outflows. The most severe selling occurred in IT (-$9,222 million), BFSI (-$6,056 million), and FMCG (-$3,744 million) — three sectors that collectively account for a significant portion of Nifty weightage, explaining the steady decline in index-level FII ownership."
March 2026 was particularly harsh for the BFSI sector, which alone witnessed $6,488 million in outflows. The IT sector also faced persistent selling nearly every month, with no major recovery during the period.
"The sectoral shift is clear: FIIs are moving toward earnings-resilient, globally comparable sectors like Communication Services and Healthcare, and away from domestic consumption, commodities, and rate-sensitive financials," the report added.
Sectors Attracting FII Inflows
Despite broad selling, some sectors continued to attract foreign investment. Capital Goods saw inflows of $2,894 million, reflecting FII confidence in manufacturing and infrastructure. Telecom also recorded $2,914 million in net inflows. In April 2026, the Power sector led with $584 million in FII inflows, followed by Capital Goods at $455 million and Metals at $126 million.
Stock-Level Changes
Among individual stocks, FIIs sharply reduced holdings in KPIT Technologies (-12.9%), Axis Bank (-11.7%), and Patanjali Foods (-10.9%). Conversely, they increased stakes in companies such as 360 ONE (+22.8%), GE Vernova T&D (+17.8%), and One 97 (+7.9%).
The report highlighted that some companies with strong earnings growth are also experiencing heavy FII selling, suggesting that foreign exits are not solely driven by earnings performance.
