FPI Ownership in Indian Markets Falls to 15-Year Low

The trend has been persistent. Except for brief upticks in two of the last 11 quarters, FPI ownership has been falling continuously since March 2023, signalling volatile global capital flows and reduced overseas allocation to Indian markets.

Decline Visible Across Key Indices

The weakness was also evident in benchmark indices. FPI share in the Nifty 50 declined by 25 basis points sequentially to 23.8%, marking a more than 13-year low. Meanwhile, the share in the Nifty 500 remained broadly stable at 18.1%.

Despite a lower ownership share, the value of holdings increased. FPI investments in NSE-listed firms rose 4.6% sequentially to ₹78.7 lakh crore as of December 31, 2025. Over time, their investments have grown at about 16.5% annually, slightly faster than the market’s 15.8% growth rate.

In the Nifty 50 specifically, FPI holdings increased 5.5% quarter-on-quarter to ₹50.2 lakh crore even as ownership share declined. The current holding level is now 4.6 percentage points below the pre-pandemic peak recorded in December 2019.

Retail Investors Surpass FPIs

Domestic investors continued strengthening their presence. Individuals now account for 18.6% of India’s listed market capitalisation, down 13 basis points QoQ from a 22-year high but still higher than FPIs for the fifth consecutive quarter, a reversal first seen in 2024 after nearly two decades.

The ownership gap has dramatically flipped. FPIs held an 11 percentage-point lead over individuals in March 2014; that gap has now reversed to -1.9 percentage points, highlighting the structural rise of retail participation in Indian equities.

Combined direct and indirect holdings reached ₹87.6 lakh crore by December 2025, reflecting a 34.2% annualised growth rate since March 2020 and about 22% CAGR over the past decade.

Sector Allocation: Financials Still Dominant, Communication Services Rising

FPIs continued to favour financial stocks, though less aggressively than earlier. Financials still formed about 34.5% of FPI portfolios, remaining the anchor sector and making FPIs the largest non-promoter shareholders in the segment. However, the sector’s ownership share declined 88 basis points QoQ to 23.4%, near a 21-year low.

Communication services emerged as the strongest conviction area. FPI share in the sector rose 81 basis points QoQ to 23.7%, a 25-quarter high. Allocation within FPI portfolios climbed to a more than 16-year high of 5.8%, nearly doubling over the past five years, reflecting rising foreign interest in telecom infrastructure, digital platforms, and data-driven businesses.

Energy also saw increased participation, with FPI share rising 78 basis points to a five-quarter high of 16.7%.

Continued Caution In Consumption And Commodity Segments

FPIs maintained an underweight stance in consumption and commodity-linked sectors, including consumer staples, materials, and large-cap energy companies. Consumer discretionary and financials recorded the sharpest ownership declines, with discretionary falling 1 percentage point QoQ to 15.9%, a 14-quarter low.

Industrials saw slightly less negativity but still remained underweight. Healthcare, utilities, and consumer staples recorded modest declines, while IT, utilities, and healthcare overall remained broadly neutral.

The report noted FPIs also turned incrementally negative on consumption-oriented plays during the quarter, indicating selective risk reduction rather than broad de-risking.

Long-Term Trend: From Expansion To Structural Moderation

FPI ownership rose steadily between 2002 and 2015, briefly interrupted during the 2007–08 global financial crisis. It moderated over the following years due to global uncertainty driven by events such as the US-China trade dispute and Brexit, before recovering through December 2019.

The COVID-19 shock in early 2020 triggered a sharp but temporary decline. Massive global liquidity support restored flows during the second half of 2020. However, the trajectory has turned persistently downward since then due to recurring COVID waves, China’s slowdown, geopolitical tensions, aggressive US Federal Reserve tightening, renewed trade frictions, and relatively elevated valuations of Indian equities compared with other emerging markets.

As a result, FPI ownership fell below 17% in the September 2025 quarter and declined further in the December 2025 quarter to its lowest level in more than 15 years.

Structural Shift In Market Ownership

Overall, the data indicate a structural change in Indian equity markets. Even as the absolute value of foreign investments continues rising, their shareholding is shrinking due to faster growth in domestic participation. Retail investors are increasingly acting as a stabilising force, reducing dependence on volatile global capital and reshaping market ownership dynamics.