After a year of rally, foreign investors were net sellers in Indian equities in FY26 due to the market’s underperformance, trade uncertainties, weak rupee, higher interest towards global AI space, and elevated US bond yields, as per the Economic Survey 2025-26.
Ownership Shift Occurs
In Q2, the share of value holdings by foreign institutional investors were at a 13-year low of 16.7% while that of domestic players reached a lifetime high of 18.3%.
The Survey noted that the combined share of holdings by domestic as well as retail investors and high-net-worth individuals reached a record high of 27.8% during the quarter. “…even though FIIs remain important participants in the Indian capital market.
Market Performance Trends
The first nine months of FY26 saw correction and consolidation, with benchmark indices Nifty 50 and Sensex rising only 10-11%.
The market also did not perform at par with global peers such as the US, South Korea, Japan, China, and Singapore.
However, what supported the market from a steep fall was measures such as ease in income tax, GST, monetary policy, receding inflation, and better corporate earnings in Q2.