Foreign institutional investors' share of Indian equity ownership has fallen to a 17-year low of 15.1% despite their holdings growing significantly, according to an analysis by OmniScience Capital. The investment firm's data shows that FII holdings have increased 3.6 times since 2012 to approximately $783 billion, rising from $217.3 billion when their ownership share was around 15-16%. This divergence highlights how domestic investor participation has grown faster than FII holdings, making ownership percentage a less meaningful measure of foreign investor confidence. As Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital, noted, "The ownership share had already declined even as FII holdings rose, falling from around 30% in 2015 and 20% in 2020 to around 17% by 2024."
Despite heavy FII selling in 2026, foreign investors have maintained their preference for primary market investments, pouring ₹55,524 crore into IPOs while simultaneously selling secondary market stocks. According to Prime Database data, selling in the secondary market hit a record ₹3.15 trillion till September 2026, creating a stark contrast between market segments. This trend has been consistent over recent years - in 2025, FPIs sold Indian stocks worth ₹2.40 trillion but bought IPO market shares worth ₹73,910 crore, while in 2024, their selling on Dalal Street was ₹1.21 trillion against buying ₹1.22 trillion in IPOs. As noted by SAMCO Securities, "FPIs can only buy in the primary market; they can sell only if they hold a stake through pre-IPO, private equity, or venture capital investments."
The data reveals a clear growth pattern in FII investments over the past decade. According to OmniScience Capital, FII holdings stood at $217.3 billion in 2012, rising to approximately $300 billion in 2015 and $550 billion in 2020. The holdings reached a peak of around $930 billion in September 2024, before declining to the current level of about $783 billion, representing a decline of roughly $147 billion or nearly 16% from the September 2024 peak. However, compared with 2012, the value of holdings has increased by about $566 billion, demonstrating substantial long-term growth despite recent declines. The firm emphasized that "A falling share of foreign ownership does not necessarily mean foreign investors have withdrawn from the market in absolute terms."
Analysts attribute the divergent market behavior to structural factors and strategic investment approaches rather than broad market sentiment. As Apurva Sheth, head of market perspectives at SAMCO Securities, explained, "Many platforms, such as fintech and new-age manufacturing businesses, are unavailable in the secondary market, so FIIs are churning out of slower-growth listed companies into high-growth names coming to market." Devarsh Vakil from HDFC Securities noted that "FIIs are participating where they see a specific company, valuation or allocation opportunity, not necessarily making a broad bullish call on Indian equities." The preference for IPOs reflects tactical considerations, with FPIs seeking quick listing gains while secondary market buying typically involves longer holding periods. Prasenjit Paul of 129 Wealth Fund emphasized that "As long as IPOs are priced rationally, investors will continue to participate for short-term listing gains."
The analysis suggests that while FII selling can create pressure on prices, strong domestic institutional flows can provide a floor for the market. The current trend indicates that FPIs have remained net buyers in India's primary market in every calendar year since December 2009, except 2011. However, analysts warn that the upcoming Reliance Jio IPO could strain the primary market, as giant issues like NSE and Reliance pull heavy money out of the system, leaving thinner demand for smaller companies. As noted by Bonanza, "Investors may turn choosy, backing only the big names while ignoring the rest, so a short reversal looks possible." The distinction between ownership share and absolute holdings remains crucial, as ownership share captures foreign investors' proportion of the market while the value of holdings reflects the dollar value of their investments, with the two often moving in opposite directions when market dynamics change.
