FPI holding hits multi-year lows in 70% of top 100 Indian companies

Foreign portfolio investors, or FPIs, are investors based outside India that put money into Indian financial markets. They may include funds and other institutions. Unlike a company owner running a business, an FPI usually invests through tradable securities such as shares. The article focuses on how these investors are changing their allocations across Indian companies and other emerging markets.

When an FPI holds shares in an Indian company, it owns a financial stake in that company. Its holding can influence the company’s shareholder mix and trading demand. For example, the article tracks foreign stakes in TCS, HCL Technologies, ICICI Bank and HDFC Bank. It also notes that FPIs continue participating in primary issuances and block deals.

A falling FPI stake does not automatically mean the investor has abandoned India. Rahul Bhutoria called the shift a repricing of growth, not an exit. Foreign ownership in more Indian companies has also exceeded 1%, rising from about 900 in 2021 to 1,300.

A multi-year low means foreign investors’ ownership stake is near its lowest level for several years. Reaching that point across about 70% of the top 100 Indian companies would indicate a wide change in foreign allocation, not a problem limited to a few businesses. It matters because large foreign investors are important participants in Indian equity markets.

The article gives several layers of evidence. Holdings in LTM, Power Grid Corporation, SBI Life Insurance, Varun Beverages, HDFC Life Insurance, ICICI Bank, Mahindra & Mahindra, Tata Consumer Products, Cipla and Larsen & Toubro are at seven-to-eight-year lows. Stakes in 15 other companies are at three-to-five-year lows.

The shift is broad-based but strongest in large companies, especially banks and information technology. Still, the article does not describe a complete withdrawal. FPIs remain active in primary issuances and block deals, while the number of Indian companies with foreign ownership above 1% has risen to 1,300.

The most affected areas are the largest companies, particularly banks and information technology. This matters because these firms are major parts of India’s stock-market benchmarks and often attract substantial overseas investment. A broad fall in their foreign stakes can therefore change both benchmark exposure and investor sentiment.

The article names Godrej Consumer Products, Jindal Steel, Maruti Suzuki, Dr Reddy’s Laboratories, Adani Enterprises, HCL Technologies and Tata Consultancy Services. Foreign ownership in each fell to levels not seen in more than two decades. It also reports seven-to-eight-year lows in companies including ICICI Bank, HDFC Life Insurance, Cipla and Larsen & Toubro.

The source does not give exact ownership percentages for TCS, HCL Technologies or the banks. It does show that some holdings may have risen marginally during the September quarter, while remaining near multi-year lows. The decline reflects changing growth preferences and benchmark-related selling, rather than necessarily a total exit from India.

Global investors are shifting allocations toward Taiwan and South Korea because they are seen as stronger beneficiaries of the artificial-intelligence cycle. The article links this movement to changing expectations about where earnings growth will be strongest. It does not identify every company or industry driving those markets, but it clearly connects the reallocation with AI.

The benchmark impact is substantial. India’s weight in the MSCI Emerging Markets index declined from about 20% at its 2024 peak to roughly 11%. Taiwan and South Korea together now account for nearly half of the index. This changes how passive funds must distribute money when they track or adjust to the benchmark.

Rahul Bhutoria said a significant part of the selling was mechanical. Passive funds adjusted portfolios in line with benchmark weights. India also faced comparatively slower expected earnings growth: about 14-15% for the Nifty in FY27, versus roughly 33% for the S&P 500 in calendar 2026.

When large investors sell shares, the extra supply can place downward pressure on prices, especially if other buyers do not immediately absorb it. Lower prices can reduce a company’s market valuation. The effect can spread through an index when many funds make similar trades at the same time. These are standard market effects; the article does not quantify their size.

The article describes a partly mechanical channel. India’s MSCI Emerging Markets weight fell from about 20% at its 2024 peak to roughly 11%. Passive funds adjusting to that benchmark change may sell Indian holdings regardless of a company-specific decision. Slower expected Indian earnings growth added further pressure.

Lower valuations can make raising equity capital less attractive because a company may need to issue more shares for the same amount of money. Investors may also demand stronger returns, increasing financing costs. However, the article shows that FPIs still join primary issuances and block deals, so selling in the secondary market does not eliminate all access to capital.

The secondary market is where investors trade shares already issued by a company, usually with other investors. The primary market is where companies or existing large holders offer shares through new issues or negotiated transactions. A block deal is a large, separately arranged trade. Therefore, an FPI can reduce one exposure while selectively adding another.

The article gives a direct example of this split. FPIs are selling in the secondary market but continue to participate in primary issuances and block deals. They may be changing which companies, sectors or types of opportunities they prefer rather than abandoning Indian markets altogether. Rahul Bhutoria described the broader move as a repricing of growth, not an exit.

This helps explain why falling ownership in many major companies can coexist with continued foreign participation. The number of Indian companies with foreign investors holding more than 1% rose from around 900 in 2021 to 1,300. Some holdings also increased marginally during the September quarter, though they remained low.

The price-to-earnings ratio, or P/E, compares a stock’s price with the earnings expected from it. A forward P/E uses projected earnings over the coming year. Investors often judge valuation alongside expected growth: a high multiple may look reasonable if profits are expected to rise quickly, while the same multiple can look expensive when growth is slower.

The article compares the S&P 500 and Nifty 50. Both trade at roughly 18-19 times one-year forward earnings. Yet S&P 500 earnings are expected to grow about 33% in calendar year 2026, compared with 14-15% growth for the Nifty in FY27. With similar prices relative to earnings, the faster-growth market may appear more attractive.

This difference helps explain allocation changes, but it is not the only factor. India historically traded at a 25-40% premium to other emerging markets because of stronger return on equity and growth rates. Investors are now reassessing whether that premium remains justified.