The shareholding pattern reveals that the damage is concentrated at the very top. High-flying consumer discretionary favorites, tech giants, and heavy-weight private lenders have all been hit by the institutional retreat, with a select group of 13 major companies bearing the brunt of the selling between September 2024 and March 2026.
Trent leads the carnage as FII holding has collapsed from 26.62% to 15.59%. The stock has fallen 51% from its all-time high. Eternal, formerly Zomato, saw foreign ownership nearly halve in proportional terms down from 52.53% to 32.61%, a nearly 20-percentage-point exit. It trades 33% below its peak. TCS, India’s IT bellwether, has shed nearly a quarter of its FII ownership, now at 9.66%, and sits 53% off its all-time high.
The list reads like a who’s who of India Inc. Bajaj Auto, ICICI Bank, UltraTech Cement, Dr. Reddy’s, Cipla, Tech Mahindra, Max Healthcare, Asian Paints, Maruti Suzuki — all have seen FII stakes fall by more than 20% in relative terms. The sell-off has not been sector-specific but a broad and sustained retreat across several quarters.
“The intensity of selling is giving the picture that FIIs are controlling the market,” Sunny Agrawal, Head of Fundamental Equity Research at SBI Securities, told ET Markets. “To some extent, FIIs are controlling as the hammering has been across the board.”
Yet Agrawal stops short of ceding the entire narrative to foreign flows. The ground beneath that argument has shifted. Domestic institutional investors, led by mutual funds, have absorbed much of the FII exit. In calendar year 2026 alone, DII inflows have already crossed Rs 4 lakh crore — a wall of domestic money that has prevented what could have been a far steeper correction.
“The market would have fallen much more had it not been for DIIs supporting it,” Agrawal notes. While pointing out that the earnings growth has been in single digits for the last seven to eight quarters, he said investors will park money where they see earnings growth.
Rupee depreciation has further dampened returns for dollar-denominated investors, adding insult to injury. Some money, he suggests, has migrated to mid- and small-cap names — relatively smaller allocations chasing relatively stronger growth. The global artificial intelligence theme has also redirected institutional capital, with India’s and Taiwan’s weightage in emerging market baskets having been trimmed as the AI trade concentrated flows elsewhere.
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Gaurav Bhandari, CEO of Monarch Networth Capital, argues that the broad-based decline in FII ownership across a majority of Nifty constituents should not be interpreted as a wholesale abandonment of India as an asset class. “Rather, it reflects a combination of global portfolio rebalancing, elevated domestic valuations over parts of the last two years, and the relative attractiveness of alternative markets during certain periods.”
Bhandari sees the shift as a recalibration, not a repudiation. “Foreign investors have been selective in their exits, while domestic institutional investors and retail participation have provided substantial counterbalance to these flows. We continue to see capital gravitating toward businesses with stronger earnings visibility, reasonable valuations, and resilient cash-flow profiles.” Defensive and value-oriented pockets, he adds, have attracted greater interest during periods of uncertainty, while highly valued growth names have faced sharper scrutiny.
On the question of whether FIIs effectively “control” the Nifty, Bhandari says it would be an oversimplification to conclude that FIIs control the index. “Foreign investors remain an influential source of liquidity and price discovery, particularly in large-cap stocks, but the Indian market ecosystem has evolved considerably. Domestic institutional investors, retirement savings flows, SIP inflows, and retail participation now play a much larger role in determining market direction.”
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The BFSI sector offers a telling case study. ICICI Bank’s FII holding has dropped from 46.21% to 34.48%. Axis Bank has seen a 9.73 percentage point fall to 42.05%. HDFC Bank, despite its near-sacred status among global emerging market investors, has seen foreign ownership slip nearly 4 percentage points to 44.05%. Rahul Singh, CIO – Equities at Tata Asset Management, frames the sector-level selling in the context of a hostile global backdrop: “Recent FII selling in the BFSI sector reflects a challenging global macroeconomic environment marked by elevated bond yields, higher crude oil prices, commodity cost pressures, and currency volatility.”
The ongoing correction is helping valuations normalise and improving the risk-reward equation for long-term investors, he said, adding that private sector banks remain well-positioned to benefit from rising credit demand and evolving interest rate dynamics. The market veteran suggests investors should focus on disciplined asset allocation and diversification rather than attempting to time short-term market movements.
A handful of Nifty stocks have bucked the FII selling tide entirely. Wipro has seen FII stake rise from 7.27% to 8.32%. Bharat Electronics gained 2.24 percentage points. Bharti Airtel saw FII holding jump from 25.08% to 27.79% — a notable vote of confidence in a telecom consolidation story that continues to deliver on earnings. SBI, Grasim, Hindalco and Bajaj Finance have also attracted incremental FII interest.
For the long-term investor, Agrawal offers a framework to cut through the noise. “If nominal GDP growth is 10–11%, then all large corporates will also deliver commensurate returns. For alpha, look at mid- and small-caps.”
(Data: Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
