Kamal Ghorui
Foreign investors are steadily cutting their share in Indian equities, while domestic investors are stepping in stronger than ever, reshaping the ownership pattern of the stock market, according to JM Financial’s Fundamental Research report.FII ownership in Indian equities dropped to 14.7% in April 2026 from 19.9% in April 2016, hitting its lowest level since June 2012. At the same time, DII ownership rose to 18.9%, showing how Indian institutions are increasingly taking over a bigger share of the market.The report said this shift has been largely driven by domestic mutual funds, whose holdings have reached record highs due to steady Systematic Investment Plan (SIP) inflows.As foreign investors pulled money out, domestic institutions largely filled the gap. DIIs increased their holdings in 39 out of 41 Nifty stocks where FIIs sold, showing that domestic buyers have been consistently absorbing foreign exits. Over the last three years, FIIs were net sellers in 41 out of 50 Nifty-50 stocks, pointing to a broader cut in India exposure.“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 over the period. The bleeding is most severe in IT (-$9,222 mn), BFSI (-$6,056 mn) and FMCG (-$3,744 mn)–three sectors that collectively account for a disproportionate share of Nifty weightage, explaining why index-level FII ownership has been declining steadily,” the report said.March 2026 was especially tough for the BFSI sector, which alone saw $6,488 million in outflows. The IT sector also faced regular selling almost every month, with no major recovery during the period.“The sectoral shift is clear: FIIs are moving toward earnings-resilient, globally comparable sectors (Communication Services, Healthcare) and away from domestic consumption, commodities, and rate-sensitive financials,” the report mentioned.Even with this wider selling, some sectors continued to attract foreign money. Capital Goods saw inflows of $2,894 million, showing FII confidence in manufacturing and infrastructure. Telecom also recorded $2,914 million in net inflows. In April 2026, Power led with $584 million in FII inflows, followed by Capital Goods at $455 million and metals at $126 million.Among individual stocks, FIIs sharply reduced holdings in KPIT Technologies (-12.9%), Axis Bank (-11.7%), and Patanjali Foods (-10.9%).“Notable companies experiencing high FII selling by percentage change include KPIT Technologies (-12.9%), Axis Bank (-11.7%), and Patanjali Foods (-10.9%). Conversely, FIIs increased stakes selectively in companies like 360 ONE (+22.8%), GE Vernova T&D (+17.8%), and One 97 (+7.9%),” the report highlighted.The report added that some companies with strong earnings growth are also seeing heavy FII selling, suggesting that foreign exits are not being driven only by earnings.
