Foreign institutional investors (FIIs) may have reduced their overall stake in Indian equities, but they are investing across a much wider set of companies than before.
According to ICICI Securities, foreign ownership in Indian equities has fallen from nearly 20% a decade ago to around 15% currently. Most of the decline happened after the Russia-Ukraine conflict in 2022.
But despite the selling, FIIs have increased the number of Indian stocks where they hold more than a 1% stake — from around 900 companies in 2022 to nearly 1,300 stocks by March 2026.
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Why Foreign investors reduced their overall ownership in Indian equities
Foreign investors reduced their overall ownership in Indian equities mainly because of global macroeconomic uncertainty, better returns in US markets, rising geopolitical risks, and aggressive selling in large-cap stocks.
Here are the key reasons behind the decline:
- After the Russia-Ukraine conflict in 2022, global investors shifted money toward recovering US technology stocks and safer assets.
- Rising US bond yields and higher interest rates made American assets more attractive compared to emerging markets like India.
- Geopolitical tensions, including the Iran conflict and crude oil price spikes, increased concerns around inflation and India’s economic outlook.
- Weakness in sectors like IT also triggered heavy foreign selling in large-cap stocks such as Infosys, Wipro and TCS.
- Global funds also reduced concentrated positions in benchmark heavyweights and shifted toward more diversified investments across sectors and smaller companies.
Despite the selling, FIIs did not completely pull away from India. Instead, they broadened their investments across nearly 1,300 stocks, focusing more on healthcare, financials, industrials, consumer and new-age businesses.
Key Market Trend
| Trend | Observation |
|---|---|
| Overall FII ownership | Fell from nearly 20% to around 15% |
| Stocks with over 1% FII holding | Increased from around 900 to nearly 1,300 |
| Portfolio strategy | Shifted from concentrated bets to broader diversification |
| Key focus sectors | Financials, Industrials, Healthcare, Consumer |
| Large-cap concentration | Fell from 41% to around 21% |
| Mid-cap participation | Increased sharply in healthcare and new-age companies |
| Micro-cap participation | Rose significantly, especially in Home First Finance and CarTrade Tech |
| Major trigger behind selling | Russia-Ukraine conflict and shift toward US tech stocks |
| Current FII trend | More broad-based and growth-focused investing |
FIIs reducing concentration in big stocks
Earlier, a large part of foreign money was concentrated in a handful of benchmark heavyweights.
In 2022, top holdings made up nearly 41% of overall FII exposure in India. That share has now fallen to around 21%.
The trend suggests FIIs are spreading investments across sectors instead of relying only on traditional blue-chip stocks.
Large-cap stocks seeing strong foreign inflows
Several large-cap companies recorded a sharp rise in foreign ownership between March 2022 and March 2026.
| Stock | FPI Holding (Mar 2022) | FPI Holding (Mar 2026) |
|---|---|---|
| Eternal | 10.4% | 30.8% |
| HDFC AMC | 10.4% | 24.5% |
| Polycab India | 5.8% | 18.2% |
FIIs are increasing exposure to companies linked to consumption, financial services and infrastructure growth.
Mid-cap and new-age companies attract FIIs
Foreign investors are also aggressively buying mid-cap and new-age businesses.
| Stock | FPI Holding (Mar 2022) | FPI Holding (Mar 2026) |
|---|---|---|
| Max Healthcare | 14.6% | 45.4% |
| GE Vernova T&D | 0.3% | 20.4% |
| Paytm | 4.4% | 24.3% |
The data shows growing interest in healthcare, power infrastructure and digital finance companies.
Smaller companies witness biggest jump
The trend is even stronger in small-cap and micro-cap stocks.
| Stock | Increase in FPI Holding |
|---|---|
| Home First Finance | +34.8% |
| CarTrade Tech | +33.5% |
| TD Power Systems | +24.6% |
| AWL Agri Business | +19.9% |
This suggests FIIs are increasingly looking for niche growth opportunities beyond benchmark index stocks.
What this means for investors
The data indicates FIIs are not turning negative on India. Instead, they are changing strategy.
While foreign investors have reduced concentrated positions in a few legacy stocks, they are simultaneously expanding investments across 1,300 companies and multiple growth sectors.
