Foreign investors cut stakes in India's ₹1 lakh crore-plus stocks, prompting growth concerns

Foreign institutional investors (FIIs) trimmed their holdings in at least 53 Indian companies with market capitalisations of ₹1 lakh crore or more during the September quarter, coinciding with a broad sell-off in those stocks. HDFC Bank’s foreign ownership fell 2.43 percentage points as its shares dropped 30% year-to-date, while Reliance Industries saw a 0.52-point decline and its stock slipped 24.2% YTD. Other large-caps such as ITC, Mahindra & Mahindra, Tata Consultancy Services, Bharti Airtel, Maruti Suzuki India, Hindustan Unilever and HDFC Life Insurance also recorded falling foreign stakes and weaker share performance.

"Markets are forward-discounting machines," said Jimeet Modi, founder and CEO of Samco Securities. "They discount the future, and markets are essentially looking forward to what is going to happen 12 months, 18 months, 36 months out." Modi added that the current composition of the Nifty index is "rich in history and legacy but very little of what future wealth creation and value creation will happen," arguing that many large-caps have become cash-flow generators rather than growth engines.

Some analysts countered that large-caps are not overly expensive after a two-year period of flat performance. Ashutosh Tiwari, managing director and chief investment officer for public equities at Equirus Asset Management, noted that valuations have moderated, improving the risk-reward profile and positioning large-caps to benefit from any revival in FII flows. Motilal Oswal highlighted that despite strong macro fundamentals and earnings growth, sustained selling in large-cap-heavy sectors has weighed on sentiment, though valuations are now 18% below historical averages.

HSBC’s head of equity strategy for Asia Pacific, Herald van der Linde, said the FTSE India index appears pricey at 19 times earnings, but the Nifty 50’s forward PE of 16x is a level seen only twice in the past decade, suggesting limited upside. Valuation pressures are evident across private banks, IT services and consumer staples, while financials trade at a discount to historical book-value multiples.

The mixed outcomes underscore that FII exits have not uniformly depressed all stocks; One97 Communications saw foreign ownership fall 4.57 points yet its share price rose 24% YTD, and Adani Power and Sun Pharmaceutical posted gains despite selling pressure. Overall, analysts see a structural shift toward emerging sectors such as electric vehicles, semiconductors and renewable energy as key to attracting future foreign capital.