FIIs’ dichotomy: Pump in ₹74,000 crore in IPOs, pull out ₹2.4 lakh crore in secondary market in 2025

Foreign institutional investors (FIIs) have followed a split strategy in Indian equities over the past year, favouring primary market issuances while steadily trimming positions in the secondary market. Over the last 12 months, Indian primary markets attracted net FII inflows of ₹73,900 crore ($84 billion), while secondary markets witnessed far heavier net FII outflows of ₹2,40,800 crore ($27.4 billion), as per latest report by JM Financial.

Sector-wise, selling pressure was concentrated in several heavyweight segments. BFSI (Banking, Financial Services, and Insurance) saw the highest FII outflows at $1.164 billion, followed by FMCG ($0.648 billion), pharma ($0.33 billion), power ($0.304 billion), capital goods ($0.284 billion), auto ($0.228 billion) and realty ($0.104 billion), the data showed.

In contrast, FIIs selectively added exposure to services ($0.372 billion), metals ($0.331 billion), oil & gas ($0.259 billion) and IT ($0.129 billion).

Early-2025 sees sharp outflows

As per data compiled by JM Financial, January recorded the sharpest net outflow of ₹72,670 crore, driven by massive secondary market sales of ₹77,070 crore, despite primary market inflows of ₹4,390 crore. Selling continued in February, when net outflows stood at ₹46,590 crore, as secondary market exits again overwhelmed primary inflows.

A brief recovery phase was seen between March and June, when FIIs turned net buyers. Net inflows stood at ₹8,050 crore in March ₹4,400 crore in April, ₹14,680 crore in May and ₹20,420 crore in June, supported by positive flows in both primary and secondary markets.

However, the trend reversed sharply in the second half of the year. July, August and September witnessed sustained selling, with net outflows of ₹24,720 crore, ₹37,820 crore and ₹20,340 crore, respectively, as secondary market sales intensified despite continued participation in primary issuances.

October offered brief respite, with FIIs turning marginal net buyers at ₹11,050 crore, aided by strong primary market inflows and limited secondary market selling. November flows were largely flat, with net inflows of just ₹330 crore.

The year ended on a weak note, with FIIs turning net sellers after two consecutive months of buying in December. During the month, FIIs sold equities worth ₹23,690 crore ($2.6 billion), while the Nifty slipped 0.3% month-on-month, following a 1.9% rise in November. While primary markets continued to see FII interest, with inflows of ₹7,700 crore, secondary markets bore the brunt of selling, recording outflows of ₹31,400 crore.

Portfolio structure remains stable despite outflows

Despite the sustained selling, the structure of FII portfolios remained largely unchanged. BFSI, Auto, IT, Oil & Gas and Pharma continued to be the top five sectoral holdings, together accounting for nearly 60% of total FII assets in India. BFSI remained the largest allocation at 31.8%, marginally lower than in November, while IT and Oil & Gas saw a sequential rise in their portfolio share.

The sustained retreat of foreign investors is now clearly reflected in the ownership structure of NSE-listed companies, marking a significant shift in the balance of power within India’s equity markets.

FPIs ownership hits multi-year lows

As of September 2025, foreign portfolio investors (FPIs) owned just 16.9% of NSE-listed companies, the lowest level in more than 15 years, according to NSE data. The erosion in foreign ownership is not a one-off phenomenon but part of a steady downtrend that began in early 2023 and has shown little sign of reversal since. In the first half of FY26 alone, FPI ownership declined by another 63 basis points, mirroring net outflows of $8.7 billion during the September quarter, as highlighted in the NSE’s monthly Market Pulse report.

In value terms, foreign holdings fell 5.1% quarter-on-quarter to ₹75.2 lakh crore, even as India has historically been a strong compounding story for overseas investors. Over the past two decades, FPIs have expanded their India exposure at a healthy 17% annualised rate, marginally ahead of overall market growth. The latest pullback, however, has been broad-based. FPI shareholding in the Nifty 50 dropped 43 basis points to 24.1%, while ownership in the Nifty 500 slid 46 basis points to 18%, both hovering near multi-year lows.

As foreign ownership in India Inc receded, domestic investors quietly but decisively stepped in. Domestic mutual funds (DMFs) continued to strengthen their grip on NSE-listed companies, with September 2025 marking the ninth consecutive quarter of record ownership. The rise has been powered by sustained retail participation, with equity inflows of ₹1.64 lakh crore in Q2FY26, extending the streak of positive flows to 18 straight quarters.

DMFs now hold a record 10.9% stake in NSE-listed companies, with ownership at 11.4% in the Nifty 500 and 13.5% in the Nifty 50. This steady accumulation has helped domestic institutional investors (DIIs)—a group that includes mutual funds, banks, insurers and other institutions overtake FPIs for the fourth consecutive quarter, a rare shift that comes after a 21-year gap.