stock market
The Indian stock market is going through a very interesting phase at the moment. On one hand, foreign investors are continuously withdrawing their money, while on the other hand, domestic investors are standing firm on the front and saving the market from a big fall. According to the Market Pulse report of the National Stock Exchange (NSE) for the month of May, the stake of foreign portfolio investors (FPIs) in Indian companies has fallen to the lowest level in 17 years. However, it is a matter of relief for common investors that despite this huge selling, there is no panic in the market. There is a big sign hidden behind it, which is presenting a picture exactly like 2003.
Foreign stake at 17 year low
During the entire last financial year (FY26), the trend of foreign investors was continuously towards withdrawing money from the Indian market. If we look at the figures, FPIs sold shares worth about $19 billion in FY26. Its biggest impact was seen in the last quarter of the financial year, when 72 percent of the total sales were taken out of the market. After this huge retrenchment, now the share of FPI in the companies listed in NSE has come down to 15.8 percent.
According to market experts, mainly global reasons are behind this. Foreign investors are finding Asian markets like South Korea, Taiwan, Japan and Hong Kong more cheap and attractive than India. Also, due to increase in the yield of US treasury bonds, investors have shifted money from risky equity markets to safer places. Interestingly, despite such heavy selling, the value of total FPI investments has recorded a compound annual growth (CAGR) of more than 18 percent since 2020.
DII showed strength amid heavy selling
Now the big question arises that when foreign investors are withdrawing so much money, why was there no major crash in the market? The direct answer to this is our domestic institutional investors (DIIs). The figures of the report are shocking. While on one hand FPIs sold shares worth $19.7 billion in FY26, DIIs made huge purchases worth $95.8 billion in the market. This purchase was almost five times more than foreign selling. This strong domestic liquidity saved the stock market from falling victim to any major fall. Today the situation is such that by Q4FY26, DII’s stake in companies has increased to 19.6 percent.
Keep an eye on these stocks except the giants
A major change is also being seen in the strategy of foreign investors. FPIs are now staying away from those NIFTY50 stocks with high liquidity, which are already quite crowded. According to the data of Ace Equity, for four consecutive quarters till March 25, 2026, foreign investors have been increasing their stake only in a few selected companies of Nifty, whereas they have continuously withdrawn money from 10 major companies.
Talking about sectors, the selling pressure was highest in the industrial sector, while the selling pressure in consumer staples and IT was slightly less. Their confidence in the financial sector still remains and the overweight position in the communication sector remains for the 17th consecutive quarter.
sign like 2003
The increasing dominance of domestic investors is pointing towards a major historical trend. This is the sixth consecutive quarter when the share of DII in the market has been more than that of FPI. The last time this happened in the history of the Indian market was in the year 2003. At the time when foreign investors had re-entered the market, within the next 12 months the market had recorded a meteoric rise of 70 percent.
However, it is not necessary that history repeats itself exactly every time in the stock market. But, market experts clearly believe that this 17-year low level of stake of FPIs is preparing a solid ground for their strong comeback in future. If the earnings of the companies remain strong in the coming days and the valuation of the shares becomes attractive, then due to the return of foreign investors, the market may once again see a strong rise.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
