Key facts
- FIIs have reduced stakes in 43 of 50 Nifty stocks since September 2024, impacting the benchmark's returns.
- Thirteen major Indian companies have faced the most significant institutional selling.
- Trent, Zomato, and TCS are among the companies with the largest FII stake collapses.
- Domestic institutional investors have absorbed a significant portion of the FII sell-off.
- Some FII capital has shifted towards mid- and small-cap stocks and global AI themes.
Foreign institutional investors (FIIs) have systematically reduced their holdings in a significant majority of Nifty 50 stocks since September 2024, leading to a stagnation of the benchmark index's returns over the past two years. The selling pressure has been concentrated on 13 major blue-chip companies, including consumer discretionary favorites, tech giants, and private lenders.
Trent has seen its FII holding collapse from 26.62% to 15.59%, with the stock falling 51% from its peak. Eternal, formerly Zomato, experienced a nearly 20-percentage-point exit of foreign ownership, and its stock trades 33% below its high. India's IT bellwether, TCS, has shed nearly a quarter of its FII ownership, now at 9.66%, and is down 53% from its all-time high.
Other prominent companies like Bajaj Auto, ICICI Bank, UltraTech Cement, Dr. Reddy's, Cipla, Tech Mahindra, Max Healthcare, Asian Paints, and Maruti Suzuki have also seen their FII stakes fall by more than 20% in relative terms. This sell-off is described as broad and sustained, not confined to a specific sector.
Sunny Agrawal, Head of Fundamental Equity Research at SBI Securities, noted that the intensity of selling suggests FIIs are controlling the market, but cautioned against attributing the entire narrative to foreign flows. Domestic institutional investors (DIIs), particularly mutual funds, have absorbed a substantial portion of the FII exit, with inflows exceeding Rs 4 lakh crore in calendar year 2026 alone, preventing a steeper correction. Agrawal also pointed to single-digit earnings growth for the past seven to eight quarters and the migration of capital to mid- and small-cap names and global AI themes as factors influencing investment decisions.
Gaurav Bhandari, CEO of Monarch Networth Capital, views the broad decline in FII ownership as a recalibration rather than a repudiation of India as an asset class. He attributes it to global portfolio rebalancing, elevated domestic valuations, and the relative attractiveness of alternative markets. Bhandari emphasizes that domestic institutional investors and retail participation have provided a counterbalance, with capital gravitating towards businesses with strong earnings visibility and reasonable valuations.
In the BFSI sector, ICICI Bank's FII holding dropped from 46.21% to 34.48%, Axis Bank saw a 9.73 percentage point fall to 42.05%, and HDFC Bank's foreign ownership slipped nearly 4 percentage points to 44.05%. Rahul Singh, CIO – Equities at Tata Asset Management, links this selling to a challenging global macroeconomic environment characterized by elevated bond yields, higher crude oil prices, and currency volatility.
Conversely, a few Nifty stocks have attracted incremental FII interest, including Wipro (stake rose from 7.27% to 8.32%), Bharat Electronics (gained 2.24 percentage points), and Bharti Airtel (holding increased from 25.08% to 27.79%). SBI, Grasim, Hindalco, and Bajaj Finance have also seen increased FII investment.