Largecaps bear the brunt as FIIs reduce stakes across markets in June quarter

Foreign Institutional Investors (FIIs) have significantly trimmed their holdings across largecap, midcap, and smallcap stocks during the June quarter, with the largest proportional reductions seen in the largecap segment. Recent data shows that FIIs cut stakes in 55% of largecap companies, compared to 50% in midcap and 53% in smallcap companies.

In terms of absolute numbers, FIIs reduced their holdings in 62 out of 112 largecap companies, 68 out of 135 mid-cap companies, and 519 out of 971 smallcap companies during the quarter.

While the total number of companies with reduced FII stakes is highest in the smallcap segment—largely due to the greater number of stocks—the proportion of largecap companies experiencing stake cuts is the highest, suggesting a potential shift in investor sentiment or risk tolerance, according to ACE Equity data.

This pattern may reflect a cautious approach by FIIs towards bluechip stocks amid changing macroeconomic conditions and sector-specific challenges.

To better understand the market impact, we examined the stock price movements of companies where FIIs reduced stakes and identified the top five laggards in each segment—largecap, midcap, and smallcap—that have seen the steepest declines following the June quarter. Additionally, we highlighted the companies where FIIs held significant stakes as of the June quarter.

In the largecap category, stocks such as ABB, Shriram Finance, and Indian Railway Finance Corporation have dropped more than 15% from early July to the present, spanning about two months. FIIs hold a notable stake in Shriram Finance, which decreased slightly to 52.61% in the June 2025 quarter from 53.58% in March, highlighting a moderate but meaningful pullback by foreign investors.

Within the midcap space, companies like Rail Vikas Nigam, Bharat Heavy Electricals, and Suzlon Energy have dropped 15-25% in the last two months. One97 Communications leads in FII ownership here, with a stake of 54.87% in June, slightly down from 55.39% in March, indicating a gradual withdrawal.

Smallcap stocks, including Dreamfolks Services, Reliance Infrastructure, and Marksans Pharma, have suffered even steeper declines—exceeding 35% over the same period. Among these, Five-Star Business Finance stands out with the highest FII holding at 58.13% in June 2025, down marginally from 58.75% in the previous quarter, indicating that even heavily held smallcaps have not been spared from foreign selling pressure.

The trend underscores growing foreign investor caution in India’s equity markets, particularly towards bluechip companies, signaling a need for market participants to closely monitor FII activity and its potential impact on stock performance going forward.