For the first time since June 2012, foreign institutional investors own less of Dalal Street than domestic funds, and the rupee, crude oil, and a global AI trade are the reasons no one is coming back fast.
FII ownership hits a number not seen since June 2012
FII ownership of Indian equities fell to 14.7% in April 2026, the lowest since June 2012, per JM Financial’s Fundamental Research report released this week. A decade ago, foreign funds controlled nearly 20% of the market. That 520-basis-point slide didn’t happen overnight. It’s been grinding lower for ten years, and 2026 has been the acceleration phase.
Domestic Institutional Investors, meanwhile, have built to 18.9% as of March 2026, a record high and, for the first time, higher than FII ownership. Domestic mutual funds are at a record share of equity holdings, fuelled by uninterrupted SIP inflows that have turned retail India into the market’s de facto shock absorber. The crossover is real, and it’s structural.
The rupee wrecked the return math, and FIIs did the arithmetic
Here’s the angle the wire copy missed. This isn’t primarily about Indian earnings or valuations. The rupee has shed over 10% against the dollar since March 2025, crossing Rs 95 to the dollar by late April 2026. For a foreign fund that earns returns in dollars, a 12% equity gain in rupee terms evaporates entirely once currency conversion is applied. The investment thesis broke before the P&L did.
On top of that, US 10-year Treasury yields were hovering between 4.37% and 4.45% through the period, per Business Standard data. The choice facing a global allocator: earn a risk-free 4.4% in dollars, or bet on an Indian market where the currency is depreciating at double-digit annual rates. Many chose the former. Crude oil compounded the problem; Brent touched $126 a barrel on April 30, 2026, per BusinessToday, pushing India’s import bill higher and adding to rupee pressure in a self-reinforcing loop.
DIIs absorbed 39 of 41 Nifty stocks where FIIs sold
JM Financial calls it a “near-perfect counter-absorption,” and the data backs that up. Over the past three years, FIIs were net sellers in 41 of 50 Nifty-50 stocks. In 39 of those 41 cases, DIIs stepped in as buyers. Every single FII exit, almost without exception, was met by a domestic institution on the other side. That’s not coincidence. That’s a structural change in who sets Indian equity prices.
“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 bleeding is most severe in IT (−$9,222 mn), BFSI (−$6,056 mn) and FMCG (−$3,744 mn).” — JM Financial Fundamental Research, May 2026
Where the money went: sector-level FII flows, last 12 months
Outflows (net sellers):
- IT: −$9,222 million
- BFSI: −$6,056 million
- FMCG: −$3,744 million
Inflows (net buyers):
- Telecom: +$2,914 million
- Capital Goods: +$2,894 million
- Power (April 2026 only): +$584 million
- Capital Goods (April 2026): +$455 million
- Metals (April 2026): +$126 million
March 2026 was particularly brutal for BFSI, $6,488 million of outflows in a single month from that sector alone. IT saw persistent outflows every single month with no meaningful recovery recorded across the full 12-month window. The report noted this directly.
The hidden split: FIIs are still buying India, just not on the stock exchange
What most coverage of this story skips: FIIs have not walked away from India entirely. Per JM Financial’s data, over the last 12 months, the Indian primary market, IPOs and new issuances, clocked FII net inflows of Rs 72,200 crore ($8.2 billion). The secondary market, by contrast, logged FII net outflows of Rs 3.41 lakh crore ($37.3 billion) across the same period.
FIIs are dumping listed stocks while selectively participating in new listings where pricing power and lock-in structures work in their favour. That’s a material distinction. It means the ownership decline in listed equities overstates the degree of actual India exit.
Capital is rotating within Asia, not leaving it
The money leaving Indian secondary markets isn’t going to New York. It’s going to Taipei and Seoul. According to J.P. Morgan Private Bank’s 2026 Asia outlook, Taiwan and South Korea are receiving close to 30% of total global AI capital expenditure, funnelled into TSMC, Samsung Electronics, and SK Hynix. The South Korean Kospi staged a roughly 76% rally in 2025, and Taiwan’s market followed on AI semiconductor demand.
India, which lacks a major listed AI hardware supply chain, is not part of that trade. FIIs aren’t exiting India because they’ve lost faith in the country; they’re chasing a global technology cycle that India structurally cannot participate in at the same level. That’s a different problem, and a solvable one, but it takes time.
Stock-level winners and losers
Also Read: KPIT TECHNOLOGIES NSE Stock Price Today
At the individual stock level, FII selling was heaviest in KPIT Technologies (−12.9%), Axis Bank (−11.7%), and Patanjali Foods (−10.9%) by percentage change in stake. What stands out is that some of these are among the strongest EPS compounders in the market, exits driven by macro and currency pressure, not company-level deterioration.
FIIs selectively increased positions in 360 ONE (+22.8%), GE Vernova T&D (+17.8%), and One 97 Communications (+7.9%).
Heaviest FII selling: KPIT Tech −12.9% | Axis Bank −11.7% | Patanjali Foods −10.9%
FII stake increases: 360 ONE +22.8% | GE Vernova T&D +17.8% | One 97 +7.9%
What to watch next
- USD/INR stabilisation below Rs 93—the threshold analysts cite for renewed FII secondary market re-entry
- June 2026 quarterly rebalancing — historically drives outsized sector-level FII repositioning
- India-US bilateral trade deal — cited by analysts as the single catalyst most likely to reverse FII sentiment at speed
FAQ
Q. Why is FII ownership at a 14-year low in India in 2026?
Three compounding factors: the rupee has depreciated over 10% since March 2025 (crossing Rs 95 per dollar), erasing dollar-denominated returns on Indian equities; US Treasury yields above 4.4% offer competitive risk-free dollar returns; and global AI capital is rotating into Taiwan and South Korea, which supply the semiconductor hardware underlying the AI boom. Per JM Financial (May 2026), FII ownership has fallen from 19.9% in April 2016 to 14.7% in April 2026 — its lowest since June 2012.
Q. Are FIIs still investing in India at all in 2026?
Yes, selectively, and only in the primary market. JM Financial data shows FIIs were net buyers of Rs 72,200 crore ($8.2 billion) in Indian IPOs and primary issuances over the last 12 months, even as they sold Rs 3.41 lakh crore ($37.3 billion) in the secondary market over the same period. The ownership decline in listed equities overstates the actual India exit.
Q. Which Indian sectors are FIIs buying in 2026?
Per JM Financial’s April 2026 data: the Power sector attracted $584 million in FII inflows in April alone, followed by Capital Goods ($455 million) and Metals ($126 million). Over 12 months, Telecom (+$2,914 mn) and Capital Goods (+$2,894 mn) were the only two large sectors to record consistent net FII inflows, reflecting conviction in India’s infrastructure and manufacturing cycles.
Sources: JM Financial Fundamental Research (May 2026) · Business Standard (Apr 30, 2026) · BusinessToday (May 8, 2026) · J.P. Morgan Private Bank Asia Outlook 2026 · Republic World · NSDL data via 5paisa. All flow figures in USD millions unless stated.
