Foreign Investors Cut Overall India Exposure But Expand Holdings Across More Stocks

Foreign institutional investors (FIIs) now hold a smaller share of Indian equities compared with a decade ago, even as they continue to widen their participation across the broader market, according to a report by ICICI Securities.

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The brokerage noted that aggregate foreign ownership in Indian equities has declined to nearly 15% from around 20% ten years ago. A significant portion of the reduction came after the Russia-Ukraine conflict in 2022, a period that also coincided with a recovery phase in major U.S. technology stocks.

Even as there has been a reduction in aggregate holdings, the increase in the number of Indian companies where there are substantial foreign investments has been considerable.

As per the report, the number of companies that have FPIs holding more than 1% equity shareholding has grown to 1,300 from almost 900 in 2022.

Move Towards Diversification in Foreign Investments

There was an emerging trend in foreign investments, as noted in the report. Foreign investment was concentrated on large stocks. In the year 2022, approximately 41% of the total foreign investments were held by the largest shares in the portfolio of foreign institutional investors. However, that percentage has decreased to about 21%.

At the same time, overseas investors have increased allocations toward companies linked to newer growth themes and expanding domestic sectors.

Among large-cap stocks, companies such as Eternal, HDFC AMC and Polycab India recorded a noticeable increase in foreign investor ownership during the period under review.

In the mid-cap segment, Max Healthcare, GE Vernova T&D and One97 Communications, the parent company of Paytm, emerged among the companies receiving higher foreign participation.

The trend was also visible in smaller companies. Micro-cap firms including Home First Finance and CarTrade Tech saw foreign ownership rise by more than 30 percentage points between March 2022 and March 2026, according to the brokerage data.

Broader Market Participation In Focus

The report indicated that foreign investors are increasingly diversifying their India portfolios across sectors such as financial services, healthcare, industrials and consumer-focused businesses rather than relying heavily on a few index-heavy companies.

This broader allocation trend comes even as headline FPI flow data continues to show persistent selling pressure in Indian equities over recent years.

ICICI Securities noted that the continuing reduction in holdings of legacy large-cap stocks has distorted the broader picture of foreign investment trends in India.

The brokerage added that while aggregate ownership levels have declined, foreign participation across sectors and market capitalisation segments has become more evenly distributed, reflecting continued interest in long-term domestic growth opportunities.

The change also points to a shift in investment strategy, with global investors increasingly seeking exposure to sector-specific growth themes instead of maintaining concentrated positions in traditional benchmark leaders.