FII ownership at 14-year low in 2026 as DIIs lead

The shift investors are watching

Foreign institutional investor (FII) ownership in Indian equities has fallen to levels last seen more than a decade ago, while domestic institutional investors (DIIs) have steadily increased their share. Multiple recent datasets point to the same trend: foreign ownership is compressing, domestic ownership is expanding, and the balance of power in India’s equity market is shifting.

A report cited by The Economic Times puts FII ownership at 14.7%, a 14-year low. Over the same period, DIIs have raised their holdings to 18.9%, acting as a stabilising counterweight as global investors reassess allocations amid geopolitical tensions, currency pressures, and volatile oil prices.

What the latest ownership numbers show

JM Financial’s Fundamental Research report tracks a longer decline: FII ownership in Indian equities fell from 19.9% in April 2016 to 14.7% in April 2026, the lowest level since June 2012. The same report highlights that DII ownership has risen to 18.9%, reflecting the growing role of Indian mutual funds, insurers, and pension funds.

Other market snapshots differ by universe and measurement date, but reinforce the direction of travel. For example, Prime Database data cited in the report pegs FPI ownership at 16.13% as of March 31, 2026, described as a 14-year low, while domestic institutional ownership climbed to 19.24%, a record high.

A market where local institutions now matter more

The implication is not just statistical. The reports describe a structural change in participation: domestic institutions now provide a larger “cushion” during periods of foreign selling, helped by consistent inflows into mutual funds and insurance products.

One key driver highlighted is steady Systematic Investment Plan (SIP) inflows into mutual funds, which have helped domestic institutions absorb supply when foreign investors pulled back.

Foreign flows: tactical re-entry, not a full comeback

ArunaGiri, CEO of TrustLine Holdings, told ET Markets that FII ownership in Indian-listed equities is around 14.7%, down from nearly 18% a few years ago. She also pointed to positive foreign flows in recent trading sessions but cautioned that these should not be seen as a decisive shift.

Her view, as reported, is that the recent inflows look more like the start of a “tactical re-entry trade” driven by improving relative valuations and indications that the heaviest selling pressure may have passed, rather than a broad-based return of foreign capital.

Sector rotation beneath the headline selling

JM Financial’s report breaks down where foreign selling has been most intense and where it has been selective. The biggest foreign selling has been seen in IT, BFSI, and FMCG, sectors that also carry significant weight in benchmark indices.

At the same time, foreign investors showed selective buying interest in sectors such as Power, Construction, and Capital Goods. Interest also increased in mid-cap and select small-cap stocks, where growth potential is seen as stronger.

The IT unwind is visible in ownership data

The reduction is sharpest in parts of technology. TrustLine’s ArunaGiri highlighted that IT majors Infosys, TCS, HCL Technologies and Tech Mahindra saw their combined FII portfolio share drop from about 12.4% in March 2022 to 4.7% in March 2026.

This matters because IT is one of the most globally owned parts of the Indian market. A sustained reduction in foreign ownership there can drag aggregate ownership metrics lower, even if there are pockets of buying elsewhere.

Goldman Sachs: earnings revisions are the key variable

Goldman Sachs linked the next meaningful phase of foreign inflows to earnings, not macro variables like oil. In its framing, earnings revisions have become “the most important variable” guiding foreign flows.

Goldman’s “re-entry clock” is tied to Q4 FY2026 earnings reports, due through May and June, and whether they show evidence of an upward revision cycle, particularly in large-cap financials, consumption, and industrials.

Goldman also named 12 “alpha picks” in this context: Hindustan Unilever, Larsen & Toubro, Bajaj Auto, Bank of Baroda, Trent, Solar Industries India, Siemens, Bajaj Holdings & Investment, Bosch, Swiggy, One 97 Communications (Paytm), and MRF.

Key ownership and flow metrics at a glance

Where FIIs sold, and where they bought

Market impact: what this ownership change means

A lower foreign ownership base can change how Indian equities respond to global risk events. With DIIs consistently absorbing supply, the market may see reduced dependence on foreign flows for day-to-day liquidity, even though FIIs still remain important in price discovery and large-block transactions.

The data also suggests that FII selling is not purely an earnings story. The report notes that some companies with strong earnings growth are still seeing heavy FII selling, implying that allocation constraints, risk limits, or broader positioning decisions are also at play.

Why the next trigger is likely to be results season

From the information presented across reports, two things stand out. First, domestic flows through mutual funds and insurance have become a persistent counterbalance, with cumulative domestic buying cited at about $147 billion since the sell-off began. Second, foreign investors appear focused on visibility in earnings revisions, with Goldman pointing directly to Q4 FY2026 results (May and June) as the window that could start a clearer re-entry phase.

Conclusion

FII ownership in Indian equities has slipped to multi-year lows, while DIIs have risen to record or near-record levels across several datasets, supported by steady SIP-driven inflows. Sector rotation shows heavy foreign selling in IT, BFSI and FMCG, alongside selective buying in Power, Capital Goods and Telecom. The next widely watched checkpoint for foreign flows, as highlighted by Goldman Sachs, is whether Q4 FY2026 earnings reports through May and June signal the start of an upgrade cycle.