Foreign investors' equity holdings in India decline to 14-year low
What's the story
Foreign investors' equity holdings in India have witnessed a decline for the first time in three years, according to data from the National Securities Depository Limited (NSDL). The share of foreign institutional investors (FIIs) in Indian publicly traded equities has dropped to 15.5%, its lowest since 2011. As of December 15, their equity assets under custody stood at $815 billion, down by 2.1% from $832 billion at the end of 2024.
Market withdrawal
Foreign funds withdraw nearly $18 billion from Indian equities
Since January 2025, foreign funds have withdrawn nearly $17.97 billion from India's equity markets. This comes despite the resilience of benchmark indices, with Sensex and Nifty both gaining nearly 9% in 2025. Meanwhile, domestic institutional investors (DIIs) have pumped over ₹7.63 lakh crore into equities this year alone. This has taken their share to a record high of 18.26% in Q3 of this fiscal year.
Market pressure
India faces pressure amid premium valuations and earnings downgrades
India has been one of the most impacted emerging markets in 2025 as foreign investors have reduced their exposure amid premium valuations and earnings downgrades. However, analysts note that the valuation premium of MSCI India versus MSCI Emerging Markets has fallen below its long-term average. This could pave the way for a stronger performance in 2026.
Investment shifts
AI-driven global narrative influences foreign investment trends
For nearly two years, an AI-driven global narrative has directed capital toward technology-heavy markets, leaving sectors like industrials, consumer discretionary and financials relatively under-owned in India. However, with indications that the AI trade may be losing steam, strategists think foreign investors could start rotating back into these segments. Despite this pressure on India, other Asian markets have also seen similar trends with Taiwan witnessing $103 billion outflows over six years and Korea recording $28 billion outflows.