FPI ownership in India Inc hits 15-year low as domestic investors take charge

After years of dominance, foreign investors are steadily losing ground in India’s stock markets. Foreign portfolio investors (FPIs) now own just 16.9% of NSE-listed companies, their lowest share in over 15 years, as of September 2025. The decline extends a trend that began in early 2023 and shows little sign of reversing.

“Barring a marginal uptick in two quarters, FPI ownership in NSE-listed companies had been on a steady decline since March 2023, mirroring volatility in foreign capital flows,” NSE said in its monthly Market Pulse report.

In the first half of FY26 alone, FPI ownership slipped another 63 basis points, reflecting net outflows of $8.7 billion during the September quarter, as per the NSE report, a monthly review of Indian economy and markets.

In value terms, foreign holdings fell 5.1% quarter-on-quarter to ₹75.2 lakh crore, even though FPIs have historically grown their India exposure at a robust 17% annualised rate over the past two decades — slightly faster than the overall market. The decline was broad-based, with FPI share in the Nifty 50 down 43 bps to 24.1% and in the Nifty 500 down 46 bps to 18%, both at multi-year lows.

The ownership shift reflects foreign investors’ evolving sector bets. FPIs “retained their strong overweight stance on financials,” while adding exposure to communication services, even as they stayed cautious on consumption and commodity-linked sectors like energy, materials, and consumer staples. Their view on industrials remained negative, and sentiment toward IT turned mildly bearish amid global tech uncertainty.

The report noted that FPIs retained their “strong overweight stance” bet on financials, while adding exposure to communication services, even as they stayed cautious on consumption and commodity-linked sectors like energy, materials, and consumer staples. They also maintained a perennially negative stance on Industrials and turned mildly bearish on information technology. Among other sectors, FPIs retained a neutral stance on consumer discretionary albeit with incrementally positive bias following the recent GST measures, healthcare, utilities and real estate.

Domestic MFs take the driver’s seat

As FPI ownership in India Inc retreated, domestic mutual funds (DMFs) strengthen their hold in NSE listed companies. September 2025 marked the ninth consecutive quarter of record ownership, fuelled by ₹1.64 lakh crore in equity inflows during Q2FY26 — the 18th straight quarter of positive flows.

DMFs now hold a record 10.9% stake in NSE-listed companies, 11.4% in the Nifty 500, and 13.5% in the Nifty 50. Their steady rise helped domestic institutional investors (DIIs) — which include mutual funds, banks, insurance firms, and other institutional players — overtake FPIs for the fourth straight quarter, a feat achieved after a 21-year gap.

“The DII-FPI gap has swung dramatically — from -12 percentage points in 2014 to positive territory now,” the report noted. Persistent retail participation via SIPs, averaging ₹28,697 crore a month, continues to power the momentum.

Within DMFs, active funds expanded their share to 9%, while passive funds held steady at 2%. Portfolio alignment also shifted closer to the benchmark, with funds remaining overweight on large-cap financials, underweight on energy and materials, and positive on mid-tier healthcare. Interestingly, while they deepened their underweight stance on consumer staples due to rising digital and quick-commerce competition, they grew more constructive on consumer discretionary stocks, aided by recent GST tweaks.

“Unlike FPIs, domestic funds have turned more balanced on IT,” the report observed, suggesting a gradual easing of the sector’s underperformance bias.

Retail investors hold firm

Individual investors continued to be the quiet stabilisers of India’s equity story. Their share in NSE-listed companies stayed steady at 9.6% in the September quarter, a range they’ve maintained for over two years. Renewed inflows of ₹20,469 crore in Q2FY26 kept participation robust.

The real action, however, was outside the blue-chip universe. Ownership among individuals in companies excluding the top 10% by market capitalisation rose 48 bps QoQ to a 19-year high of 16.7%, underscoring the rising retail appetite for mid- and small-cap stocks.

Today, individuals — directly and through mutual funds — control 18.75% of India’s total market capitalisation, the highest in 22 years. That translates to ₹83.6 lakh crore in value, with a five-year CAGR of 29.8%. “It’s a remarkable reversal,” notes an equity strategist. “A decade ago, FPIs held an 11-percentage-point lead over retail investors. Now, individuals are ahead by nearly two.”

Despite a ₹2.6 lakh crore decline in household equity wealth during Q2FY26 amid market volatility, cumulative gains since April 2020 stand at a staggering ₹53 lakh crore.

Promoters and govt stake steady

Promoter ownership — which had slipped for four straight quarters — held steady at 50.1% in NSE-listed companies and 49.3% in the Nifty 500 during September 2025. A rise in foreign promoter holdings was offset by a decline in private Indian promoter share. Within the Nifty 50, though, promoter ownership continued its gradual slide, hitting a 23-year low of 40%.

Meanwhile, government ownership in NSE-listed firms dipped 10 bps to 10%, unwinding gains from the previous quarter. This was despite PSU banks’ relative outperformance — the Nifty PSU Bank Index rose 4.5% even as the broader Nifty Total Market Index declined 3.8%.

In contrast, government stake in the Nifty 50 edged up 17 bps to 6.8%, while in the Nifty 500, it ticked down slightly to 10.9%.