As foreign portfolio investors (FPIs) continue to reduce their exposure to Indian markets, market veteran Samir Arora believes the selling is not being driven by concerns over high valuations, a reason often cited in several reports.
Acknowledging foreign outflows, Arora argued that a large part of the capital is being reinvested within the market rather than being pulled out of India altogether. Citing data from an ICICI Securities report, he noted that foreign ownership in some of India's largest companies has declined significantly over the past decade. However, he said the reduction in holdings does not necessarily indicate a broad-based exit from the country.
According to Arora, FPI holdings stood at around $1 trillion at one point and currently stands at roughly $800 billion. Out of this, nearly $60 billion has been entirely withdrawn from India, while the rest has largely been a result of portfolio reallocation and market movements.
While highlighting that the top Indian companies are currently trading at or near their five- or ten-year lows, he suggested foreign investors are not selling because valuations are expensive. Instead, they are reducing exposure to slower-growth businesses and reallocating capital towards new businesses.
He pointed to a growing preference for new-age, highlighting companies where foreign ownership has increased substantially over the past four years. FPI ownership in Eternal rose from 10.4% in 2022 to 30.8% in 2026. In HDFC AMC, foreign shareholding increased from 10.4% to 24.5% during the same period, while GE Vernova saw FPI ownership climb from just 0.3% to 20.4%.
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