FIIs hold $717 billion worth of Indian stocks, but trim exposure across 56% of Nifty 500 companies. Where are they investing?

FIIs hold $717 billion worth of Indian stocks, but trim exposure across 56% of Nifty 500 companies.

Where are they investing?

ETMarkets.com Synopsis FIIs held $717 billion worth of Nifty 500 stocks in September 2026, with private banks accounting for the largest share of their investments.

While foreign investors increased exposure to sectors such as healthcare, technology and automobiles, they trimmed holdings in 56% of Nifty 500 companies over the past year.

By Veer Sharma, ETMarkets.com XPeers HDFC Bank Share Price ICICI Bank Share Price Kotak Mahindra Bank Share Price Axis Bank Share Price Federal Bank Share Price Oct 30, 2026, 02:37:00 PM IST Follow us Private banks accounted for the largest share of foreign institutional investors' (FIIs) investments in Indian equities during the September quarter, with holdings worth $144 billion out of their total portfolio of $717 billion in the Nifty 500.

Reliance Industries accounted for $30 billion, Bharti Airtel $29.2 billion and Axis Bank $16.4 billion.In terms of sectoral allocation, banking, financial services and insurance (BFSI), including banks, capital markets, insurance and NBFCs, remained the largest exposure for FIIs in the Nifty 500 at 33.1% as of September 2026.

However, the allocation moderated by 130 basis points sequentially and 120 basis points year-on-year.

FIIs remained overweight on the sector by 340 basis points compared with its 29.8% weight in the Nifty 500.

Automobiles were the second-largest sectoral allocation, accounting for 8.1% of FII holdings, up 20 basis points quarter-on-quarter but down 10 basis points year-on-year.

Healthcare accounted for 7.4%, with its share rising 60 basis points sequentially and 130 basis points annually.

Oil and Gas had a 6.2% allocation, down 20 basis points quarter-on-quarter and 60 basis points year-on-year, while Technology accounted for 5.7%, up 60 basis points sequentially but down 160 basis points annually.

The top five sectors together made up 60.5% of FIIs' total allocation in the Nifty 500.

During the September quarter, foreign investors increased their exposure to Internet and New-Age Technology, Healthcare, Technology, Metals, Real Estate and Automobiles.

They, however, reduced allocations to Private Banks, Utilities, Consumer, Capital Goods, Capital Markets, Oil and Gas, NBFCs and Telecom.FIIs sell in secondary market, but continue to invest in primary issues The sectoral positioning comes against a backdrop of diverging institutional flows in the Indian equity market.

Over the past two years, FIIs have stepped up selling in the secondary market in response to adverse global developments, including soaring oil prices, rising bond yields and higher interest rates.ADVERTISEMENT Despite their continued selling in the secondary market, foreign investors have increasingly channelled capital into the primary market, indicating a growing preference for emerging investment themes.

Sustained retail participation and record monthly systematic investment plan (SIP) inflows of around $3.4 billion further strengthened domestic institutional ownership.ADVERTISEMENT ADVERTISEMENT This shift in ownership, which has gathered momentum since 2021, continued in September 2026.

DII ownership of Nifty 500 stocks climbed to a record 21.3%, while FII holdings fell to a new low of 16.8%.FIIs cut holdings across market capitalisations The divergence between domestic and foreign investors was also visible across market-cap segments.

According to SEBI's categorisation, large-, mid- and small-cap stocks accounted for 65%, 23% and 12%, respectively, of the Nifty 500's total market capitalisation.ADVERTISEMENT DIIs increased their stakes across market-cap segments to record highs as of September 2026.

FIIs, in contrast, reduced their holdings across market caps on a year-on-year basis.Among Nifty 500 companies, FIIs lowered their holdings in 56% of the stocks over the past year, while DIIs increased their stakes in 69%.

The divergence was even more pronounced among Nifty 50 constituents, foreign investors reduced their holdings in 70% of the companies, whereas domestic institutions raised their stakes in 82%.ADVERTISEMENT FII ownership in the Nifty 50 fell 230 basis points year-on-year and 40 basis points quarter-on-quarter to 22.4% in September 2026.

DII holdings, meanwhile, climbed to a record 26.2%, up 150 basis points year-on-year and 10 basis points sequentially.On a yearly basis, DIIs raised their stakes in 41 Nifty 50 companies, while FIIs reduced their holdings in 35.