Ahmedabad Times

Whilst overseas institutional traders (FII) have slashed their focus in India’s marquee blue-chip shares to almost half of what it was 4 years in the past, they’ve quietly expanded the variety of Indian shares they maintain stakes in from roughly 900 to 1,300. International traders are piling into capital items, manufacturing, defence, healthcare and new-age tech, sectors the place the motion is predominantly in mid- and small-cap shares.

The mixture FPI holding of Indian shares has ebbed to roughly 15%, down from 20% a decade in the past. However inside that retreat lies a structural repositioning as the highest 10 Nifty shares, which as soon as accounted for 40.9% of all FPI holdings in India, now command simply 21.3%. The cash is shifting down the market-cap ladder, chasing development in corners of the Indian economic system that international traders as soon as largely ignored.

“FIIs aren’t precisely shunning Indian blue-chips; they’re rebalancing their portfolios,” stated Pranay Aggarwal, Director and CEO of Stoxkart. “The rise in FII possession from round 900 shares to 1,300 shares reveals that foreigners are increasing their India universe. It does point out rising curiosity in choose small and midcaps, however not blindly as FIIs are specializing in corporations with stronger earnings development, higher governance, liquidity and scalability.”

The availability of investable shares has itself grown dramatically. India’s IPO increase between 2023 and 2025 produced 259 main-board listings, together with a wave of new-age tech corporations like Ather Vitality, Groww, Pine Labs, PhysicsWallah, Meesho and others giving overseas traders “a richer, deeper menu that merely didn’t exist in 2022,” based on Vishad Turakhia, CEO of Equirus Securities.

Individually, PLI incentives and the China-plus-one manufacturing shift have created a wholly new cohort of mid-cap industrial winners in electronics, capital items, specialty chemical compounds and energy tools which had little listed illustration 4 years in the past.

Aggarwal factors to capital items, manufacturing, healthcare, defence, client discretionary and monetary companies as the brand new searching grounds for overseas cash.
“To grasp the sharp decline in FII possession in giant blue-chip shares, one first wants to take a look at the broader context of total overseas institutional possession in India,” stated N. ArunaGiri, CEO of TrustLine Holdings. “FII possession in Indian-listed equities has fallen to a fourteen-year low of round 14.7%, in comparison with almost 18% ranges seen a number of years in the past. On the identical time, India’s weight within the MSCI Rising Markets Index has sharply declined from over 20% about two years in the past to over 12% at present.”ArunaGiri argues the retreat from blue-chips is much less a few deliberate pivot to broader Indian markets and extra a few bigger international reallocation commerce. “What has successfully performed out is a reallocation of FII capital away from India in the direction of markets corresponding to Taiwan and Korea, the place compelling AI-led funding narratives have emerged — particularly semiconductor chips. The altering weights inside the MSCI EM Index mirror this pattern fairly clearly,” he stated.

Turakhia explains the macro math by mentioning that whereas the Nifty 50 delivered roughly 35% returns in rupee phrases between March 2022 and Could 2026, the rupee’s 27-28% depreciation over the identical interval eviscerated these positive aspects for dollar-based traders. “After adjusting for the rupee’s transfer, cumulative USD returns for FPIs compressed to low-single digits per yr, materially underperforming US equities and even US fixed-income property,” Turakhia stated. Over the identical interval, the S&P 500 generated greenback returns exceeding 60%, buoyed by AI-driven earnings resilience, whereas US Treasury yields moved into the 4-5% vary — providing significant risk-free greenback returns with no rising market publicity.

On the identical time, sector-specific headwinds compounded the ache in India’s largest shares. IT — a serious Nifty constituent — has corrected 40% amid fears that AI adoption will cannibalize enterprise IT spending. “With Anthropic and OpenAI in search of fairness debuts this yr, they’re aggressively rolling out new merchandise that are prone to influence demand for Indian IT companies,” Turakhia famous. Banking, the opposite heavyweight sector, has additionally struggled, with HDFC Financial institution underperforming the broader market within the wake of its merger with HDFC Ltd.

(Disclaimer: Suggestions, ideas, views and opinions given by the specialists are their very own. These don’t signify the views of The Financial Instances)