Foreign institutional investors have sold close to ₹3 lakh crore of Indian equities so far in 2026, and the pullback has been visible in the country’s biggest companies in every quarter this year. Of the 50 stocks in the Nifty, 21 saw FII shareholding fall in each of the March, June and September quarters.
Eighteen of those 21 stocks have fallen in price this year. ITC, Maruti Suzuki, HDFC Life, HDFC Bank and Tata Motors Passenger Vehicles are among the weakest.
Where the stake cuts were deepest
Max Healthcare saw the sharpest drop in FII ownership, at 10 percentage points. HDFC Bank followed with 8.3 percentage points, HDFC Life with 5.5, InterGlobe Aviation with 5.1 and Kotak Mahindra Bank with 4.7.
The selling is not confined to one corner of the market. Banks, insurers, automobiles, consumer companies, telecom, IT, aviation, pharmaceuticals, cement and diversified conglomerates all feature on the list.
In the September quarter, FIIs trimmed their holdings in 70% of Nifty 50 companies compared with a year earlier. Their share of the index fell 230 basis points year-on-year and 40 basis points from the previous quarter, to 22.4%.
Domestic money fills the gap
Domestic institutions have gone the other way. According to Motilal Oswal, DII ownership in the Nifty 50 reached a record 26.2%, up 150 basis points on the year and 10 basis points on the quarter. DIIs raised their stakes in 82% of Nifty 50 companies from a year earlier.
The pattern is similar in the wider market. In the Nifty 500, FII ownership slipped to a fresh low of 16.8% in September, while DII ownership hit a record 21.3%.
DIIs put $17.7 billion into Indian equities in the second quarter of FY27, against $700 million from FIIs, Motilal said. Monthly SIP inflows of around $3.4 billion are adding to domestic buying power. Even so, domestic liquidity has not stopped a broad correction in the stocks foreign investors have been selling.
Earnings are steady
Corporate results have not mirrored the foreign exodus. Jefferies said 56% of the 105 companies it tracks beat expectations in the September quarter, and FY27 estimates were raised for 50% of them. The brokerage lifted its MSCI India earnings-growth forecast by one percentage point to about 15%.
Banks, two-wheelers, power utilities and consumer technology firms were stronger. Autos, cement, some consumer companies and Larsen & Toubro faced margin pressure.
Kotak Institutional Equities said Nifty 50 net profit for the second quarter, for companies that have reported, grew 19% year-on-year and came in 1.7% above its estimates. It expects Nifty earnings to grow 18% in FY27 and 13% in FY28.
Motilal Oswal said FIIs have stepped up selling in response to adverse global events, while still putting more money into the primary market. In its reading, that points to a preference for newer themes rather than a full exit from India.
Quest Investment Managers noted that Taiwan and Korea have gained weight in emerging-market portfolios on the back of a narrow group of semiconductor and AI-linked companies. India, it said, offers a more diversified mix across financials, consumption, manufacturing, healthcare and services. It added that India’s smaller share of the emerging-market universe could leave room for fresh allocations if domestic demand stays firm, earnings improve and market leadership broadens.
Valuations have eased
Harsh Gupta Madhusudan, chief India strategist at Ionic Asset, said the Nifty 50’s earnings-yield gap over the 10-year government bond yield sits at the 18th percentile of his monthly series since 2011. The readings for the Nifty Midcap 150 and Nifty Smallcap 250 were 56% and 100%. He added that the Nifty 50’s price-to-earnings ratio is in the bottom 1% of its five-year range.
“Financials are cheapest,” he said, noting that the Bank Nifty trades at 12.7 times earnings, in the fifth percentile of its history. But because domestic holding in the sector is heavy, it “may need foreign buying for a bid,” he said.
Kotak listed three possible triggers for a recovery: an end to the Iran-US war and lower crude prices, a reassuring second-quarter earnings season, and a shift in focus from price and flows to value.
Shreyash Devalkar of Axis Mutual Fund said the real divide is no longer largecaps versus midcaps or growth versus value, but between companies delivering sustainable earnings growth and those falling short. He put the working hurdle at roughly 13% to 15% or higher, and said businesses growing below 10% to 12% may struggle even after a fall in valuations.
Madhusudan said he remains constructive on India’s earnings cycle. He is tracking Brent crude, the rupee-dollar rate, US long-term yields, the dollar index, bank credit, margin-trading exposure and FII flows.
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