FPI ownership in Indian equities falls to 17-year low; what lies ahead?

The revelations from the report at the current juncture prove to be insightful and cut through the noise of media headlines.

The FPI selling in Indian markets is not a new phenomenon, and it is being closely monitored across the investor community. The latest report by NSE highlights the continuation of a similar trend, with some contrasting observations as well. Here is what the data says

FPI ownership at 17-year lows

Foreign Portfolio Investors (FPIs) have been net sellers in Indian equities throughout FY26, by selling equities worth $19 million. Out of these $19 million, roughly 72% of the amount was liquidated in the last quarter of fiscal year 2026 alone. The FPI ownership in NSE-listed entities currently stands at 15.8%, falling 90 bps sequentially to the lowest level in 17-years. The sharp drop in FPI ownership is primarily driven by global factors such as cheaper peers in emerging markets like South Korea, Taiwan, Japan and Hong Kong. Along with this, rising bond yields also pulled money from riskier assets to safe bets like US treasury bonds. Despite the record selling, the FPI’s ownership worth has grown at over 18% CAGR for six years starting 2020. The data also signals a reduction in over ownership in Indian equities, while opting for other options in Asia.

What did FIIs sell in FY26?

According to NSE’s Market Pulse report, FPIs turned negative on the Industrials and less negative on Consumer Staples and Information Technology, while maintaining an underweight position on the former and neutral on the latter. Meanwhile, FPIs continued to maintain an overweight stance on Financials, though they slightly reduced the OW position as of March 2026. The overweight position in communications was retained for the 17th quarter in a row and maintained a longstanding underweight position on Materials and a neutral stance on the Energy segment. Additionally, FPIs also maintained a neutral position on Consumer Discretionary, Healthcare and Utilities.

What’s the catch?

Though the headline remains negative, FPIs have reduced their holding in Indian equities to a 17-year low. The report also highlights an interesting trend for the broader market. FPIs sold $19.7 billion in FY26, out of which the majority of the selling happened in March 2026 as investors reassessed the position in the aftermath of the West Asia crisis. The selling was outperformed by strong buying by domestic institutional investors who held the ground by buying equities worth $95.8 billion, nearly five times the scale of FPI outflows. However, barring the selling pressure in NIFTY50, the FPI’s ownership inched up marginally. Which means, FPIs got out of the crowded and high liquidity stocks and built positions in the broader indices.

The Ace equity data as of 25th March 2026 suggests that FPIs have increasingly added stakes in only single stocks for the past four consecutive quarters from the NIFTY50 index.

On the flipside, FPIs have consistently reduced their stakes in 10 companies for the past four quarters consecutively.

(Source: Ace Equity, Date as of 25th March 2026)

The above data underscores the fact that FPIs have been increasingly bearish on the NIFTY50 companies and small-cap stocks, while maintaining a relatively neutral position on the Midcap stocks.

What lies ahead?

In addition to the above data, the report also highlighted an important phenomenon. The DII ownership in the NSE-listed space stood at 19.6% as of Q4FY26, above the FPI ownership for six consecutive quarters. Last time this was observed in 2003, after which FPIs flooded the Indian markets and led to a nearly ~70% rally in the coming twelve months. The past data and instances need not necessarily be replicated in the same way. However, underownership of FPIs in the Indian stocks makes the best case for their return with affordable valuations and sustainable earnings growth.