FIIs hold $717 billion worth of Indian stocks, but trim exposure across 56% of Nifty 500 companies. Where are they investing?

Private banks accounted for the largest share of foreign institutional investors' (FIIs) investments in Indian equities during the September quarter, with holdings worth $144 billion out of their total portfolio of $717 billion in the Nifty 500. Five companies, HDFC Bank, ICICI Bank, Reliance Industries, Bharti Airtel and Axis Bank, together accounted for 25% of the total FII holding value, according to a strategy note by Motilal Oswal.

HDFC Bank topped the list with FII holdings worth $54.3 billion, followed by ICICI Bank at $50.1 billion. Reliance Industries accounted for $30 billion, Bharti Airtel $29.2 billion and Axis Bank $16.4 billion.

In terms of sectoral allocation, banking, financial services and insurance (BFSI), including banks, capital markets, insurance and NBFCs, remained the largest exposure for FIIs in the Nifty 500 at 33.1% as of September 2026. However, the allocation moderated by 130 basis points sequentially and 120 basis points year-on-year. FIIs remained overweight on the sector by 340 basis points compared with its 29.8% weight in the Nifty 500.


Automobiles were the second-largest sectoral allocation, accounting for 8.1% of FII holdings, up 20 basis points quarter-on-quarter but down 10 basis points year-on-year. Healthcare accounted for 7.4%, with its share rising 60 basis points sequentially and 130 basis points annually. Oil and Gas had a 6.2% allocation, down 20 basis points quarter-on-quarter and 60 basis points year-on-year, while Technology accounted for 5.7%, up 60 basis points sequentially but down 160 basis points annually.

The top five sectors together made up 60.5% of FIIs' total allocation in the Nifty 500. During the September quarter, foreign investors increased their exposure to Internet and New-Age Technology, Healthcare, Technology, Metals, Real Estate and Automobiles. They, however, reduced allocations to Private Banks, Utilities, Consumer, Capital Goods, Capital Markets, Oil and Gas, NBFCs and Telecom.

FIIs sell in secondary market, but continue to invest in primary issues

The sectoral positioning comes against a backdrop of diverging institutional flows in the Indian equity market. Over the past two years, FIIs have stepped up selling in the secondary market in response to adverse global developments, including soaring oil prices, rising bond yields and higher interest rates.

Despite their continued selling in the secondary market, foreign investors have increasingly channelled capital into the primary market, indicating a growing preference for emerging investment themes. Motilal Oswal expects this divergence in institutional flows to persist in the near term, given the challenging global macroeconomic environment.

During the second quarter of FY27, domestic institutional investors (DIIs) invested $17.7 billion in Indian equities, while FIIs added $0.7 billion. Sustained retail participation and record monthly systematic investment plan (SIP) inflows of around $3.4 billion further strengthened domestic institutional ownership.

This shift in ownership, which has gathered momentum since 2021, continued in September 2026. DII ownership of Nifty 500 stocks climbed to a record 21.3%, while FII holdings fell to a new low of 16.8%.

FIIs cut holdings across market capitalisations

The divergence between domestic and foreign investors was also visible across market-cap segments. According to SEBI's categorisation, large-, mid- and small-cap stocks accounted for 65%, 23% and 12%, respectively, of the Nifty 500's total market capitalisation.

DIIs increased their stakes across market-cap segments to record highs as of September 2026. FIIs, in contrast, reduced their holdings across market caps on a year-on-year basis.

Among Nifty 500 companies, FIIs lowered their holdings in 56% of the stocks over the past year, while DIIs increased their stakes in 69%. The divergence was even more pronounced among Nifty 50 constituents, foreign investors reduced their holdings in 70% of the companies, whereas domestic institutions raised their stakes in 82%.

FII ownership in the Nifty 50 fell 230 basis points year-on-year and 40 basis points quarter-on-quarter to 22.4% in September 2026. DII holdings, meanwhile, climbed to a record 26.2%, up 150 basis points year-on-year and 10 basis points sequentially.

On a yearly basis, DIIs raised their stakes in 41 Nifty 50 companies, while FIIs reduced their holdings in 35. On a quarterly basis, domestic institutions increased their stakes in 33 companies, compared with foreign investors cutting their holdings in 31.

Stocks seeing the biggest changes in DII ownership

Among Nifty stocks, DII holdings increased by more than 5 percentage points year-on-year in Max Healthcare, InterGlobe Aviation, Kotak Mahindra Bank, HDFC Bank, BSE, HDFC Life Insurance, Eternal and ICICI Bank.

In contrast, Hindalco, Grasim, Adani Ports, Jio Financial Services, SBI, ONGC, Nestle and Asian Paints recorded a year-on-year decline in DII holdings.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.