Foreign institutional investors (FIIs) have reduced their holdings in 235 smallcap companies listed on the BSE for three consecutive quarters. The continued selling points to sustained caution among overseas investors towards the smaller end of the market.
The pullback has hit share prices hard. Nine of these stocks have fallen between 50% and 70% so far in calendar year 2026, a sign of significant corrections in a segment that often moves more sharply than large companies.
Smallcap stocks tend to be more volatile than their larger peers. They usually have smaller market values and thinner trading volumes, which can make prices swing more widely when big investors sell. When foreign funds reduce their stakes over several quarters in a row, it can weigh on sentiment and make it harder for these shares to recover quickly.
The trend shows that foreign investors have not returned to the smallcap segment in a meaningful way through the year. For retail investors, the decline is a reminder that smaller companies carry higher risk, particularly when institutional money is leaving.