FPIs FLEE Indian Stocks! Rs 2 Lakh Cr Gone! Are DIIs Buying the Dip? 🤯

Economy

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Updated on 13 Nov 2025, 01:04 pm

Foreign institutional and portfolio investors (FPIs) have significantly reduced their holdings in Indian equities, marking a 15-year low after selling stocks worth nearly Rs 2 lakh crore in 2025. Data from NSE shows a substantial decline in FPI ownership for Nifty 50 and Nifty 500 companies in the September quarter, dropping to 13-year lows of 24.1% and 18% respectively. This trend of decreasing FPI holdings has been consistent since March 2023, reflecting volatile foreign capital flows. The first half of FY26 saw FPI share in NSE-listed companies fall to 16.9%, the lowest in over 15 years, driven by net outflows of $8.7 billion during the September quarter.

FPIs showed a preference for financial services while increasing exposure to communication services. However, they displayed caution towards consumption and commodity-related sectors like consumer staples, energy, and materials, maintaining reduced positions. Their stance remained negative on industrials and slightly pessimistic on information technology, while neutral on consumer discretionary, healthcare, utilities, and real estate.

In contrast, domestic mutual funds (DMFs) have achieved new ownership records for nine consecutive quarters, supported by steady equity inflows totalling Rs 1.64 lakh crore in Q2FY26. DMF ownership now stands at 13.5% in Nifty 50 and 11.4% in Nifty 500. This surge in domestic buying has led domestic institutional investors to collectively hold 18.7% in NSE-listed firms, exceeding FPI ownership for four consecutive quarters. Individual investors have maintained stable ownership, but their stake in companies outside the top 10% by market capitalization has risen to a 19-year high, indicating growing interest in mid and small-cap stocks.

Impact: This significant sell-off by FPIs can lead to reduced market liquidity and potentially put downward pressure on stock prices and valuations. Conversely, the strong buying by domestic institutional investors and stable retail participation provide a crucial buffer, supporting the market and indicating a shift in ownership from foreign to domestic hands. This trend can lead to increased domestic influence on market direction and corporate governance. The sector-specific preferences of FPIs suggest a cautious outlook on certain growth areas, while their increased allocation to financials highlights a belief in the stability of the banking sector. Rating: 8/10

Difficult Terms: * **Foreign Institutional Investors (FPIs)**: These are investors from other countries who invest in financial assets like stocks and bonds in India. * **Portfolio Investors**: Investors who hold a collection of financial investments like stocks, bonds, and other securities. They are often grouped with FPIs in market analysis. * **NSE-listed stocks**: Shares of companies that are traded on the National Stock Exchange of India. * **Basis Points (bps)**: A unit equal to 1/100th of a percent, used to denote changes in interest rates or fees. 100 basis points equal 1 percent. * **FY26 (Fiscal Year 2025-2026)**: The financial year in India typically runs from April 1st to March 31st. FY26 refers to the period from April 1, 2025, to March 31, 2026. * **Q2FY26 (Second Quarter of Fiscal Year 2025-2026)**: This refers to the period from July 1, 2025, to September 30, 2025. * **DMFs (Domestic Mutual Funds)**: Funds managed by Indian asset management companies that pool money from Indian investors to invest in a diversified portfolio of securities. * **Nifty 50**: A benchmark stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange. * **Nifty 500**: A stock market index that represents the top 500 companies listed on the National Stock Exchange of India. * **Market Capitalisation**: The total market value of a company's outstanding shares of stock, calculated by multiplying the total number of shares by the current market price of one share.