Foreign investors are steadily reducing their stake in Indian stocks, while domestic investors are stepping in stronger than ever, reshaping the ownership pattern in the stock market, according to a fundamental research report by JM Financial.Investment industries’ ownership of Indian stocks fell to 14.7% in April 2026 from 19.9% in April 2016, reaching the lowest level since June 2012. Meanwhile, ownership of Indian investment firms rose to 18.9%, illustrating how Indian institutions are increasingly capturing a larger share of the market.This shift was largely driven by domestic investment funds, whose holdings reached record levels due to steady Systematic Investment Plan (SIP) inflows, the report said.As foreign investors withdraw their money, local institutions have largely filled the gap. Private equity firms increased their holdings in 39 of the 41 nifty stocks as FIIs were sold, showing that domestic buyers were consistently absorbing foreign exits. Over the last three years, FIIs have been net sellers in 41 out of 50 Nifty-50 stocks, indicating a broader decline in exposure to India.“FII outflow data over a 12-month period reveals a market where selling was the dominant theme, with 10 out of 16 sectors recording net outflows during the period.
The bleeding is most severe in the IT (-$9,222 million), BFSI (-$6,056 million), and FMCG (-$3,744 million) sectors – three sectors that together account for a disproportionate share of the Nifty’s weighting, which explains why FII ownership has steadily declined across the index.March 2026 was particularly difficult for the BFSI sector, which alone saw outflows of $6,488 million. The IT sector also faced regular sell-offs almost every month, without any significant recovery during this period.“The sectoral shift is clear: FIIs are moving towards profit-resilient, globally comparable sectors (telecommunications services and healthcare) and away from domestic consumption, commodity and interest rate-sensitive financial sectors,” the report said.Even with this broader selling, some sectors continued to attract foreign money. Capital goods saw inflows worth $2,894 million, showing FII’s confidence in manufacturing and infrastructure.
Telecom also recorded net inflows of $2,914 million. In April 2026, energy led with $584 million of FII flows, followed by capital goods at $455 million and metals at $126 million.Among individual stocks, FIIs sharply reduced their holdings in KPIT Technologies (-12.9%), Axis Bank (-11.7%) and Patanjali Foods (-10.9%).“Notable companies with high FII sales by percentage change include KPIT Technologies (-12.9%), Axis Bank (-11.7%), and Patanjali Foods (-10.9%),” the report highlighted. “Conversely, FIIs selectively increased their stakes in companies like 360 ONE (+22.8%), GE Vernova T&D (+17.8%), and One 97.” (+7.9%).The report added that some companies with strong earnings growth are also seeing significant FII sell-offs, indicating that foreign divestments are not solely dependent on profits.