Foreign Institutional Investors (FIIs) have significantly adjusted their positions in the Indian equity market, reducing holdings in **39 Nifty50 stocks** during the December 2025 quarter. This widespread trimming has led to a major milestone where Domestic Institutional Investors (DIIs) now hold a higher collective stake in the Nifty50 than their foreign counterparts. As of February 2026, FII ownership in the Nifty50 has settled at **24.3%**, a decline of **90 basis points** year-on-year. In contrast, domestic participation has surged to an all-time high of **24.8%**, fueled by consistent mutual fund inflows and retail participation. Key Stock Adjustments Foreign investors executed notable cuts in several blue-chip companies during the final quarter of 2025. **Bajaj Auto** saw FII holdings drop from **9.65% to 8.83%**, while **HDFC Bank** experienced a reduction from **48.38% to 47.67%**. Other major names facing exposure cuts included **Mahindra & Mahindra**, **Asian Paints**, and **State Bank of India**. Despite the broad exit from many names, foreign capital remains highly concentrated. Five major stocks now account for approximately **$268 billion** of total FII holdings in the Nifty 500. **HDFC Bank** remains the largest single holding by value at **$93.5 billion**, followed by **ICICI Bank** at **$58.5 billion** and **Infosys** at **$26.7 billion**. Recent Market Rebound The early days of February 2026 have signaled a potential shift in sentiment. After net selling nearly **₹34,350 crore** in December 2025 and **₹38,740 crore** in January 2026, foreign investors have turned net buyers in recent sessions. In the first ten days of February, FIIs have pumped approximately **₹4,970 crore** back into the cash market. This includes a significant single-day purchase of **₹2,254 crore** on February 9. This renewed interest is attributed to moderating valuations and the finalization of a new trade framework between India and the United States. Sector Performance and Outlook While FIIs reduced exposure in 15 of 24 sectors over the past year—most notably in Technology, Real Estate, and Consumer Durables—they have increased stakes in **PSU Banks, Telecom, and Oil & Gas**. The Nifty50 is currently trading at a forward price-to-earnings multiple of approximately **20.1x**, which is broadly aligned with its 10-year historical average. Market analysts observe that the valuation premium of Indian equities over other emerging markets has compressed to **47%**, down from **80%** in late 2024, making entry points more attractive for foreign capital. Support from domestic liquidity continues to act as a shock absorber. Monthly SIP flows remain robust, and DIIs have acted as net buyers of over **₹8,973 crore** during the recent market recovery phase, providing a structural floor to the indices even during periods of foreign caution.