Foreign portfolio investors (FPIs) have been part of a decade of reducing investment in Indian shares. The FPI has sold shares worth about Rs 2.43 lakh crore (about 28.3 billion) on a pure basis in the last two quarters, further reduced their stake in listed companies.
The ownership of FPI in Indian shares is continuously decreasing from its high level of 2015. His investment stake in Indian equity at the end of December 2024 was 19.1 percent, which was just more than 18.8 percent at the end of September 2024. But still the lowest has been around June 2010. It was 18.2 percent in June 2010. The FPI reduced its investment in 14 of the last 20 quarters (on a quarterly basis). In contrast, he had reduced his stake in 15 out of 40 quarters between June 2005 and March 2015.
Analysts believe that FPI ownership in Indian shares will decrease further in the current quarter. Their analysis is based on the promoter share at the end of the quarter and the market capitalization figures of 1,176 listed companies of BSE-500, BSE Midcap, BSE Smallcap indices. The joint market capitalization of these indices was Rs 382.3 lakh crore on Wednesday, which is 94.4 per cent of the total market capitalization of all companies listed on BSE.
This sample includes major merger and acquisitions, including the merger of HDFC with HDFC Bank, the acquisition of GSK consumer by Hindustan Unilever, Sesa Sterlite’s Sterlite merger with Sterlite Industries and Aditya Birla Nuvo’s merger with Grassim Industries.
FPI investment in India was at a new height in the March 2015 quarter. At that time foreign investors had 25.7 percent of India’s top listed companies. With the latest decline, the ownership of FPI is now reduced by 660 basis points or about a quarter from its high level.
Analysts are indicating ‘structural’ decline in FPI investment, mainly due to lethargy in corporate income growth in India. Dhananjay Sinha, a co-head of research and equity strategy at Systematics Institutional Equity, said, “Originally, FPI has reduced its participation in the Indian equity market during the last decade.”
Sinha said, “In contrast, the FPI was a strong partner in the 2004-2015 period, except the global financial crisis of 2008 and the 2012 Eurozone crisis (when they became pure sellers for a short time).” They hope that FPIs can continue profitable in the near future until corporate income improves.
G Chokalingam, founder and Chief Executive of Equinomics Research, said, “The market capitalization of Indian companies listed in the last decade increased by almost 5 times, which has also rapidly climbed the market price of FPI investment.” He said that this is the reason why many people are now booking profits as they do not see proper assessment in many stocks at the moment.
First Published – March 20, 2025 | 10:54 pm IST