Business

IIE DIGITAL DESK , May 9: India’s stock market has witnessed a significant decline in foreign participation, with Foreign Institutional Investors (FII) steadily withdrawing funds over recent months, pushing foreign ownership in listed equities to its lowest level in nearly 14 years.

JM Financial Fundamental Research, foreign institutional holding in Indian equities has dropped to around 14.7 percent, the weakest level since June 2012. The report highlights that this marks a sharp reversal from earlier years, when foreign participation in Indian markets was considerably higher, including nearly 19.9 percent in April 2016.

The data indicates that the trend of foreign capital outflows has been persistent since the beginning of the year, with April continuing the same pattern of sustained selling by overseas investors. This has created pressure on Indian equity markets, especially in sectors heavily dependent on global investment flows.

Despite the outflow from foreign investors, domestic institutional investors (DII) have played a stabilising role in supporting the market. Domestic inflows have steadily increased over the past year, with DII ownership rising to approximately 18.9 percent. A significant portion of this growth has been driven by systematic investment plans (SIPs) through mutual funds, reflecting strong retail participation in domestic markets.

The JM Financial report further notes a notable shift in ownership patterns within the Nifty50 index, where foreign institutional investors reduced their holdings in 41 companies. However, domestic institutional investors increased their exposure in 39 of these stocks, effectively offsetting some of the impact of foreign selling.

Sector-wise analysis shows that banking, financial services, and insurance segments have been among the most affected by foreign fund outflows. These sectors, which traditionally attract strong global investment interest, have experienced heightened volatility due to sustained selling pressure.

Market analysts suggest that while foreign investor sentiment has weakened, the increasing strength of domestic institutional participation is helping to provide a buffer to the broader equity market. However, continued foreign outflows remain a key concern for overall market stability and future growth momentum.