New Delhi

Foreign Institutional Investor (FII) ownership as a percentage of total Indian equities has fallen from 19.9 per cent in April 2016 to 14.7 per cent in April 2026, marking its lowest level since June 2012, according to JM Financial's Fundamental Research report.

However, as per the report, domestic Institutional Investor (DII) ownership has concurrently risen over the years, reaching 18.9 per cent. This shift highlighted a significant transformation in the market's holding structure as domestic mutual funds reached a record-high share of domestic equity holdings, a trend fuelled by consistent Systematic Investment Plan (SIP) inflows.

In what the report characterised as a near-perfect counter-absorption, DIIs increased their stake in 39 out of 41 Nifty stocks where FIIs sold. This movement indicated that domestic institutions were acting as a systematic buyer of every FII exit. The breadth of this retreat is reflected in the fact that over the past three years, 41 out of 50 Nifty-50 stocks saw net FII selling, signaling a macro-level decision to reduce India allocation.

"The 12-month FII flow data reveals a market where selling has been the dominant theme, with 10 out of 16 sectors recording net outflows over the period. The bleeding is most severe in IT (-USD 9,222 mn), BFSI (-USD 6,056 mn) and FMCG (-USD 3,744 mn)--three sectors that collectively account for a disproportionate share of Nifty weightage, explaining why index-level FII ownership has been declining steadily," the report said.

The JMFS report noted that March 2026 stood out as a particularly brutal month, with the Banking, Financial Services, and Insurance (BFSI) sector alone seeing USD 6,488 million of outflows. Furthermore, the IT sector experienced persistent outflows across almost every single month with no meaningful recovery month recorded during the period.

"The sectoral shift is clear: FIIs are moving toward earnings-resilient, globally comparable sectors (Communication Services, Healthcare) and away from domestic consumption, commodities, and rate-sensitive financials," the report mentioned.

Despite the general exits from consumption and financials, steady inflows into Capital Goods (+USD 2,894 million) suggested continued FII conviction in the manufacturing and infrastructure cycle. Telecom also recorded a net positive inflow of USD 2,914 million despite some weak months. In April 2026 specifically, the Power sector clocked FII inflows of USD 584 million, followed by Capital Goods at USD 455 million and metals at USD 126 million.

"Notable companies experiencing high FII selling by percentage change include KPIT Technologies (-12.9%), Axis Bank (-11.7%), and Patanjali Foods (-10.9%). Conversely, FIIs increased stakes selectively in companies like 360 ONE (+22.8%), GE Vernova T&D (+17.8%), and One 97 (+7.9%)," the report highlighted.

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The report emphasised that some of the strongest earnings per share compounders are witnessing the heaviest FII selling, indicating that these exits are not driven solely by earnings growth.