Mumbai: Overseas investors' holdings in nearly 70% of India's top 100 companies are at multi-year lows amid unabated selling of blue-chip stocks over the past two years, reflecting diminished appetite for local equities.
The decline in foreign ownership has been broad-based but has been more pronounced in the largest companies, especially banks and information technology.
Godrej Consumer Products, Jindal Steel, Maruti Suzuki, Dr Reddy's Laboratories, Adani Enterprises, HCL Technologies and Tata Consultancy Services (TCS) saw foreign ownership fall to levels not seen in more than two decades.
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Holdings in another 10 companies, including DLF, Reliance Industries, Bajaj Holdings & Investment, UltraTech Cement, Kotak Mahindra Bank, Axis Bank, Trent, Eicher Motors, Britannia Industries and Shriram Finance, are at more than 15-year lows.
The decline in foreign ownership reflects a repricing of growth prospects as global investors shifted allocations towards markets offering stronger earnings growth, according to Rahul Bhutoria, director and co-founder of Valtrust Capital, a New Delhi-based portfolio manager.
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"This is not an exit from India; it is a repricing of where growth sits," he said.India's weight in the MSCI Emerging Markets index has declined from about 20% at its 2024 peak to roughly 11%, while Taiwan and South Korea together now account for nearly half the index as global investors chase the artificial intelligence (AI) cycle.
Bhutoria said a significant portion of the selling was mechanical, with passive funds adjusting their portfolios in line with changes in benchmark weights.
Relatively slower earnings growth in India has added to the pressure. While the S&P 500 and Nifty 50 trade at roughly 18-19 times one-year forward earnings, S&P 500 earnings are expected to grow about 33% in calendar year 2026, compared with 14-15% growth for the Nifty in FY27.
FPI 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 such as CG Power & Industrial Solutions, Adani Power, ITC, Sun Pharma, Max Healthcare, Eternal, ABB India, Siemens, Tata Motors Passenger Vehicles, Bharat Electronics, Hindustan Aeronautics, HDFC Bank, NTPC, Cholamandalam Investment and InterGlobe Aviation – are at three-to-five-year lows.
Some of these stocks may have seen marginal increases in foreign ownership during the September quarter, but their holdings remain close to multi-year lows. The number of Indian companies in which foreign investors hold more than 1% has also increased from around 900 in 2021 to 1,300. FPIs continue to participate in primary issuances and block deals even as they sell in the secondary market.
Lokesh Manik, senior analyst at Vallum Capital, said India had historically traded at a 25-40% valuation premium to other emerging markets because of its higher return on equity (RoE) and growth rates.
