FPI Ownership – What explains FPI stake falling to a 17-year low?

In the recent quarter ending June 2026, the FPI ownership in Indian equities fell to a 17-year low of 15.1%. In the same quarter, total DII ownership touched 19.5%, marking the seventh quarter when DII ownership exceeded FPIs.

Yes, FPI influence in India has been waning

One of the arguments proffered is that FPI ownership may be constant but it is Indian ownership that is increasing. With a surge of investable liquidity in India, record SIP inflows, and promoters flush with funds; we have seen mutual funds, DIIs and promoters increasing their stake in Indian companies. However, that is just part of the story. In reality, FPIs have voluntarily cut positions. For instance, if you look at the assets under custody (AUC) of FPIs as reported by NSDL; it has fallen from $940 billion in September 2024 to $725 billion in July 2026. That is a significant 23% fall in FPI AUC.

FPIs aggressive sellers since September 2024

In a sense, September 2024 can be called the watershed moment for FPIs. That is when FPI AUC started to wane and the FPI selling intensified. In the 7 quarters, starting with the Dec-24 quarter, FPIs have net sold $60.07 billion in Indian equities. That figure is unprecedented in any stretch of 7 quarters in Indian history. Out of that, $30 billion was sold just in the first 2 quarters of 2026. Remember, FPIs were net sellers in 6 out of the 7 quarters since September 2024. In these 7 quarters, debt saw FPI inflows of $13.72 billion, on account of specific triggers and tax incentives. This level of selling in equities, has two sets of reasons; momentum and structural.

Momentum factors driving FPI outflows

Momentum has not favoured India in the last 2 years. First, there were the US tariffs imposed on India and then there was the geopolitical risk. Both were outside India’s control, but India’s deep dependence on oil, gas, and fertilizer imports became a major bottleneck. Some of India’s biggest export stories like refined oil, electronics, and electrical machinery have a huge import component. That has also made the currency vulnerable, which is evident in the rupee weakening to ₹96/$, despite more than $75 billion coming through the FCNR, OFCB, and ECB window. All this has meant high levels of imported inflation. Clearly, the momentum factors have not helped.

There are some longer-term structural issues too

The reason FPI ownership in Indian equities has been persistently falling this time is that buying is not surfacing at lower levels. In the past (including the pandemic), a sharp correction in the markets, combined with rupee weakness resulted in FPI flows coming back in a big way. Why is that missing this time around? One argument given by FPIs is that India’s nominal GDP growth has disappointed. FPIs who had assigned premium valuations to India, assuming India could replicate Chinese level growth, have been disappointed. Also, there is limited evidence of AI-preparedness or willingness to ride the AI opportunity. After all, for FPIs, India is just one of many investment options!