Foreign institutional investor (FII) ownership in Nifty-500 companies stood at 18.8 per cent in the June 2025 quarter, close to its multi-year lows.
On surface, the numbers suggest a continued retreat of foreign capital from Indian equities. But sector-level holding data show that the headline figure hides a very different story — selective accumulation in specific pockets.
Near bottom level FII stakes do not necessarily signal a uniformly bearish stance. Foreign investors seem to be shifting towards concentrated, theme-driven portfolios. Broad exposure is being trimmed in a market trading at around 22 times the FY26 estimated earnings (Nifty-50).
While FIIs don’t invest as a bloc, Nifty-500 ownership data show overseas funds have the highest holding in private sector banks (47.6 per cent), followed by telecom (23 per cent), NBFC non-lending (21.3 per cent), real estate (20.2 per cent), technology (19.1 per cent), automobiles (18.6 per cent) and healthcare (18.5 per cent). But high absolute stakes don’t always mean fresh buying.
Where’s the money
Year-on-year changes show where FIIs are actually adding. Within the Nifty-500 universe, FIIs increased their holdings in just 9 out of 24 sectors. For instance, FIIs year-on-year raised their stake in infrastructure (+520 basis points or bps), NBFC – non-lending (+470 bps), telecom (+220 bps), media (+140 bps), electronics manufacturing services or EMS (+120 bps), and chemicals (+80bp) at the end of June-2025 quarter, per Motilal Oswal Research data. Amid a cautious stance, these are the sectors where the FIIs have sharply raised holdings, even as they trimmed stake in most others.
One could very well argue this pattern stands in contrast to the broader FII behaviour. Yes, across the Nifty-500, foreign investors have been cutting holdings. Year-on-year, large declines have been witnessed in utilities (-230 bps), retail (-190 bps), automobiles (-180 bps), oil and gas (-170 bps), cement (-170 bps), logistics (-160 bps), consumer durables (-140 bps), capital goods (-100 bps), and PSU banks (-80 bps).
The selective approach adopted by foreign investors is evident at the stock level as well. In large-caps, which are the top 100 firms by market capitalisation, FIIs have 21.5 per cent, almost unchanged from a year earlier. In Nifty-50, FII holding on an aggregate basis fell 30 bps YoY in June quarter. But if you look closer, Bharti Airtel (+210 bps), Wipro (+150 bps), HDFC Bank (+140 bps) and Bharat Electronics (+110 bps) recorded year-on-year increases in FII stakes as foreigners pushed up holdings in just 10 firms of the popular index.
Many other index heavyweights saw falling foreign ownership during the same period. Examples include Axis Bank, Trent, IndusInd Bank and Dr Reddy’s.
Structural themes
The shift in sectoral allocation suggests FIIs are aligning with positioning for specific structural themes rather than maintaining broad market exposure.
Infra-related stocks stand to gain structure plays could benefit from the government’s capital expenditure push and increased private sector participation in construction, logistics and allied services. In telecom, the largest pure play listed player Bharti Airtel continues to gain from Vodafone Idea’s prolonged challenges which has been ongoing for over half a decade now. The sector is also buoyed by rising data use, 5G rollout and improving pricing power for incumbents.
Meanwhile, EMS and chemicals are tied to India’s push for self-reliance in manufacturing and diversification of global supply chains (although recent tariff war is a speed bump). New production-linked incentive (PLI) schemes have spurred encouraged investments and growth in the sector, drawing FIIs attention.
All these show that foreign investors are reallocating capital to sectors with strong upside potential. Meanwhile, domestic institutional investors have steadily increased presence with their holdings in the Nifty-500 climbing to a record 19.4 per cent.
Published on August 16, 2025
