According to a report released by ICICI Securities, FPIs have significantly broadened their participation in Indian equities since 2022 despite overall foreign ownership in the market declining due to heavy selling in large-cap stocks.

The report indicates that global investors are no longer concentrating their portfolios around a few benchmark heavyweights and are instead diversifying across sectors and market capitalisations to capture India’s long-term growth opportunities.

Overall FPI Ownership in Indian Equities Declines

Foreign ownership in Indian equities has steadily fallen over the past few years, particularly after the outbreak of the Russia-Ukraine conflict in 2022, which triggered major global capital reallocations and risk-off sentiment across emerging markets.

According to the report, aggregate FPI holdings in Indian equities have dropped to around 15 per cent currently, compared to nearly 20 per cent a decade ago.

However, despite the decline in overall ownership, the number of Indian stocks in which FPIs hold more than 1 per cent stake has increased sharply from around 900 stocks in March 2022 to nearly 1,300 stocks now.

Analysts believe this trend reflects a more diversified and broad-based investment approach by global investors toward India’s economy.

FPIs Cut Exposure to Traditional Market Heavyweights

The sharpest reduction in FPI holdings has been visible in some of India’s largest and most widely owned blue-chip companies.

Among the biggest declines, the combined contribution of HDFC Bank and former housing finance giant HDFC to FPI portfolios dropped from 11.6 per cent in March 2022 to 6.9 per cent in March 2026.

Similarly, exposure to Reliance Industries declined from 9.1 per cent to 5.3 per cent during the same period.

FPIs also reduced holdings in major IT companies including Infosys and Tata Consultancy Services, reflecting concerns over slowing global technology spending and cautious outlooks for export-driven sectors.

Other companies witnessing reduced foreign ownership include Kotak Mahindra Bank and Asian Paints.

The report noted that stocks which earlier accounted for nearly 41 per cent of total FPI portfolios now contribute only around 21 per cent, indicating a significant diversification trend.

Domestic Growth Themes Attract Fresh FPI Investments

While reducing exposure to traditional index heavyweights, FPIs have aggressively increased investments in companies linked to India’s domestic growth story.

One of the biggest beneficiaries has been Eternal, where foreign ownership surged from 10.4 per cent in 2022 to 30.8 per cent in 2026.

FPIs also sharply increased stakes in HDFC Asset Management Company and Polycab India as investors showed growing interest in financial services, infrastructure and manufacturing-linked themes.

Analysts believe India’s strong domestic demand, rising middle-class consumption and infrastructure expansion are making these sectors increasingly attractive to global investors.

Paytm, Healthcare and Midcaps See Strong Foreign Interest

Among mid-cap companies, healthcare and fintech businesses emerged as major beneficiaries of FPI inflows.

Foreign ownership in Max Healthcare Institute rose sharply from 14.6 per cent to 45.4 per cent, reflecting growing confidence in India’s healthcare sector and long-term medical infrastructure demand.

Similarly, holdings in One 97 Communications, the parent company of Paytm, surged from 4.4 per cent to 24.3 per cent during the same period.

The sharp rise in FPI interest in fintech companies indicates growing confidence in India’s digital economy, financial inclusion initiatives and online payments ecosystem.

Market experts believe global investors increasingly see India as one of the largest long-term opportunities in digital finance and technology-driven consumption.

Manufacturing and Small-Cap Stocks Gain Attention

The diversification trend has also extended to small-cap and industrial companies linked to manufacturing and infrastructure growth.

FPIs sharply increased holdings in TD Power Systems and Home First Finance Company India, highlighting rising foreign investor confidence in India’s industrial and housing finance sectors.

The report suggests foreign investors are positioning themselves in sectors expected to benefit directly from India’s manufacturing push, infrastructure spending and domestic economic expansion over the coming decade.

Financials Continue to Witness Heavy Selling

Despite selective buying, foreign investors remained net sellers in Indian equities during April 2026.

FPIs reportedly pulled out nearly ₹60,900 crore from Indian markets during the month, with financial stocks witnessing the highest selling pressure.

Financial services alone saw outflows of approximately ₹30,900 crore, followed by consumer discretionary, healthcare, energy and automobile sectors.

So far in calendar year 2026, foreign investors have withdrawn nearly $21.7 billion from Indian equities, extending the selling trend seen in 2025.

India’s Long-Term Growth Story Remains Attractive

Despite ongoing selling in select sectors, analysts believe the broader diversification trend reflects continued long-term confidence in India’s economy.

Foreign investors are increasingly focusing on structural growth themes such as manufacturing, healthcare, digital finance, infrastructure and domestic consumption rather than relying only on benchmark large-cap stocks.

Experts say India’s strong economic growth outlook, expanding middle class, policy reforms and digital transformation continue to make the country one of the most attractive long-term investment destinations among emerging markets.

The changing FPI strategy also signals a gradual shift toward a more balanced and diversified Indian equity market where opportunities extend well beyond traditional blue-chip companies.