Foreign institutional investors’ holdings in India grew 3.6 times to $783 billion since 2012

Foreign investor ownership in Indian equities has fallen to a 17-year low of 15.1 per cent, despite holdings rising 3.6 times to $783 billion since 2012. OmniScience Capital attributed the decline to rising domestic participation and household financialisation 

Mumbai: The decline in foreign institutional investor (FII) ownership of Indian equities to a 17-year low of 15.1 per cent should not be viewed in isolation, as the absolute value of FII holdings has increased 3.6 times to around $783 billion since 2012, a report showed on Monday.

The more important shift is the growing contribution of domestic investors, including retail participants, said the report by OmniScience Capital. According to FPI AUC data, FII holdings stood at around $217.3 billion in 2012, when ownership was approximately 15-16 per cent. Holdings increased to around $300 billion by 2015 and $550 billion by 2020, before peaking at around $930 billion in September 2024. They currently stand at approximately $783 billion.

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“The ownership share had already declined even as FII holdings rose, falling from around 30 per cent in 2015 and 20 per cent in 2020 to around 17 per cent by 2024. This reflected domestic investors increasing market participation faster than FIIs,” says Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital.

The report attributed the declining FII share partly to the financialisation of Indian household wealth, with investors allocating more to financial assets rather than real estate. With domestic equity participation still below developed-market levels, further domestic flows could continue to dilute the FII ownership percentage.

“The $50 billion FII outflow since 2024 also needs context. It compares with approximately $40 billion of inflows between 2017 and 2024, when the FII asset base was smaller. Currency depreciation has also contributed to the decline in the dollar value of holdings,” said Ashwini Shami, President and Chief Portfolio Manager, OmniScience Capital.

Market pressure remains, but stock-level opportunities matter. While FII selling can create pressure on prices, strong domestic institutional flows can provide a floor, said the report.