Foreign institutional investors have divested approximately $53 billion from Indian equities since September 2024, according to reports from The Economic Times. This historic selling wave has resulted in FY26 recording the highest-ever annual outflows at $21 billion, dragging MSCI India down roughly 8% since September 2024. The selling has resulted in a 67 percentage point underperformance versus MSCI Emerging Markets in US dollar terms, as reported by The Economic Times. Latest data from ICICI Securities shows FPIs remained net sellers in April 2026, pulling out ₹60,900 crore from Indian equities, with so far in CY26, FPIs have withdrawn nearly $21.7 billion from Indian markets, extending the selling trend seen in CY25 when they pulled out $18.8 billion from equities.
The sustained pressure on Indian markets is now showing signs of impact on retail investors, who have been the backbone of the recent rally. As per market analysts, retail investors are now showing signs of fatigue and exhaustion due to the prolonged selling pressure from foreign institutional investors. This development comes at a critical time when FIIs continue to pull out of Indian equities, creating a challenging environment for domestic market participants who have been supporting the market through their continued investments.
The sharpest reduction in FPI holdings has been visible in heavyweight large-cap stocks that earlier dominated foreign portfolios. The combined contribution of HDFC and HDFC Bank to FPI portfolios fell from 11.6% in March 2022 to 6.9% in March 2026, a decline of 4.7 percentage points. FPIs also sharply reduced exposure to Reliance Industries, where portfolio holding declined from 9.1% to 5.3%. Other major reductions included Infosys holdings dropping from 5.8% to 2.1%, TCS falling from 4.2% to 1.3%, Kotak Mahindra Bank from 3.1% to 1.5%, and Asian Paints from 1.2% to 0.4%. Overall, the top holdings that accounted for 40.9% of FPI portfolios in March 2022 now contribute only 21.3%.
At the sector level, financials, IT, energy, FMCG and consumer discretionary companies contributed the most to FPI selling since 2022. Financials alone saw net outflows of ₹1.8 trillion, followed by IT & hardware at ₹1.6 trillion and energy at ₹1 trillion. However, FPIs have increased investments in several high-growth sectors and emerging businesses across market caps. In the large-cap space, FPIs raised holdings in Eternal from 10.4% in March 2022 to 30.8% in March 2026, while stake in HDFC AMC rose from 10.4% to 24.5% and Polycab India climbed from 5.8% to 18.2%. Among mid-caps, FPIs increased exposure to Max Healthcare from 14.6% to 45.4%, while holdings in One 97 Communications (Paytm) surged from 4.4% to 24.3% during the period.
Jefferies has identified at least 15 stocks where the foreign-to-domestic institutional shareholding ratio remains above 1.5 times as of March 2026, with no meaningful reduction in that gap over the prior 12 months. According to The Economic Times, these include major names such as HDFC Bank, ICICI Bank, Bajaj Finance, Bharti Airtel and GMR Airports Infrastructure. Among these stocks, Jefferies has largely neutral or cautious recommendations, with analysts holding HOLD/UPF ratings on stocks like DMart, Hero, Hindalco and Wipro. The aggregate FPI holding in Indian equities has fallen to around 15% currently, from nearly 20% a decade ago, with most of the decline occurring after the Russia-Ukraine conflict in 2022.
