Some of these stocks have lost investors more than half their wealth in a year. Others, counterintuitively, have delivered double-digit gains even as foreign money walked out the door. The question for retail investors sitting on these names: is the FII exit a warning, or a contrarian opportunity?
“Market is significantly undervalued and even at moderate earnings growth rate returns are likely to be quite rewarding for the long-term investors who can tolerate volatility,” said Vikas V Gupta, CEO and Chief Investment Strategist at OmniScience Capital.
Most hated stocks of Dalal Street in FY26
Cohance Lifesciences has seen its FII holding collapse from 11.05% in March 2025 to 5.59% by March 2026, a stock that has lost 70.55% of its value over the last year. Reliance Infrastructure is down 68.83% over the same period. Go Fashion has shed 60.3% as foreign investors have been systematically liquidating the stock.
Among the large-caps on the list, ITC stands out. FIIs have trimmed their holding from 39.87% in March 2025 to 34.83% by March 2026, a reduction of over 500 basis points in a single year, across every quarter. The stock is down roughly 30% over the past year, making it one of the more painful holds in any large-cap portfolio. Kotak Mahindra Bank has seen FII holdings fall from 31% to 26.4% across the same four quarters, with the stock down 16.8%. IRCTC, once a darling of both domestic and foreign investors, has seen holdings drop from 7.37% to 4.86%, and is down nearly 28%.
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In IT, the selling pressure has been persistent and driven by structural anxiety. KPIT Technologies, once among the most celebrated auto-tech plays, has seen FII holdings erode from 17.17% to 13.25%, with the stock down 36.87%. LTT Services (LTTS) is down 19.33% over the last year, with holdings falling from 5.19% to 3.86%. HCL Technologies, a large-cap bellwether, has seen FIIs cut from 19.15% to 15.5%, with the stock off 13.17%.
The FII selling in 2026 has been largely concentrated in banks, financials and IT stocks, amid the shadow of the Gulf crisis and the threat of AI disruption to the Indian IT services model. Ashwini Shami, President and Chief Portfolio Manager at OmniScience Capital is overweight on banks, financial services, and the power sector, driven by strong earnings growth, healthy balance sheets, and significant capital allocation toward capacity expansion. “While we have traditionally been bullish on IT, the impact of AI on Indian IT remains uncertain, resulting in limited growth visibility over the medium term of two to three years.”
Pharma has not been spared either. Cipla, with a market cap of nearly Rs 1 lakh crore, has seen FII holdings decline from 26.28% to 22.55% over the year, with the stock down 19%. Sun Pharma, India’s largest pharmaceutical company by market cap at Rs 4 lakh crore, has had holdings drop from 17.96% to 15.93%, with a 4% negative return. Dr. Reddy’s Laboratories, which has actually returned 4% over the year, has nevertheless seen FIIs consistently reduce from 25.75% to 21.14%. In consumer, Dabur India is down 5.% with holdings falling from 12.68% to 9.98%. Godrej Consumer has shed 7% while FII holding compressed from 19.54% to 13.94%.
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Some of the sharpest declines in FII holding have come in smaller, high-growth names. Brainbees Solutions, the parent of FirstCry, has seen holdings fall from 7.65% to 3.52%, a stock that’s down 31% over the year. BLS International, the visa and consular services company, has seen holdings drop from 9.94% to 6.14%, with a 26% negative return. Info Edge, the digital classifieds and venture investment platform, is down 24% with FII holding falling from 33.25% to 27.96%.
Heritage Foods and Bikaji Foods, two mid-cap consumer names, are also in the list. Heritage Foods is down 14% with holdings dropping from 6.42% to 2.21%. Bikaji is down 7%, with FII holding declining from 7.33% to 4.68% across four consecutive quarters.
Yet within this list of apparent losers lies a counterintuitive subplot. Shriram Finance, one of India’s largest retail NBFCs, has seen FIIs cut holdings from 53.58% to 45.13% across every quarter, but the stock has returned 49% over the past year. Eternal (Zomato’s parent entity) has had FII holdings fall from 44.36% to 32.61%, yet the stock has returned 11%. Siemens India is up 35% even as foreign investors trimmed from 8.19% to 6.8%. These are cases where domestic institutional investors and retail money appear to be absorbing the FII supply.
Will smallcap bounce sustain?
The Nifty 50 is flat over the last year, while the midcap index has gained 9% and the smallcap index is up 4%. But the BSE Small and Midcap 400 Index bounced back sharply in April to its pre-war level of 12,000. Whether that bounce has legs is a live debate on Dalal Street.
Nuvama, in a recent note, expressed skepticism saying that SMID valuations remain more than one standard deviation rich across metrics, and earnings revival post the supply shock may be muted given the absence of large policy stimulus or pent-up demand of the kind seen in 2020 and 2022. Incomes are growing slowly and household and MSME credit multipliers remain low, the combination that could disappoint the 22% FY26–28 consensus EPS CAGR expectation, given that actual growth from FY24 to FY26 came in at just 12%. “Expect SMIDs to be range bound until fresh stimulus arrives or valuations turn cheap,” the Nuvama note stated.
Prabhudas Lilladher has responded to the uncertainty by reweighting. The brokerage is increasing weights on banks, capital goods, metals and telecom while cutting consumer and auto, turning underweight on the latter given what it describes as the second-level impact of higher crude and inflation not yet reflected in the real economy. It has added Polycab India, JSW Steel and Fortis Healthcare to its model portfolio and removed Apollo Hospitals.
The longer-term view from OmniScience Capital is more constructive. The firm estimates Nifty 50 EPS for FY27 at Rs 1,280 to Rs 1,320. At P/E multiples of 22 to 24 times, that implies a Nifty range of 28,000 to 31,000 by end of March 2027. OmniScience points to easing geopolitical tensions, moderating crude prices, a strengthening rupee, and a softening inflation outlook as potential re-rating triggers that could also bring FIIs back.
Banks, notably, look structurally sound despite the FII selling. Gross NPAs are below 2.5%, capital adequacy ratios are around 17%, and provision coverage is near 76.6%. The sector is positioned to fund incremental credit of around Rs 94 lakh crore without requiring fresh equity issuances.
(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)
