FPIs still drive stock prices despite holdings at decade-low levels

Companies with rising FPI stakes in June 2025 quarter delivered 21.73% returns on average, outpacing mutual funds, LIC, and other investor cohorts

Despite foreign portfolio investors’ (FPIs) holdings in Indian equities falling to a decade-low, they remain the most influential driver of stock prices. According to Prime Infobase, among seven key investor cohorts, companies that saw an increase in FPI holdings during the June 2025 quarter recorded the highest average gains—21.73 per cent. In contrast, stocks where FPIs reduced their stakes underperformed, with an average gain of just 16.9 per cent.

 

Stocks that saw mutual funds (MFs) raise exposure posted average returns of 16.3 per cent, while those where they reduced their exposure edged higher by 17.2 per cent. Companies where Life Insurance Corporation (LIC) increased its holdings saw a more modest average rise of 9.4 per cent, while 88 stocks where LIC cut its stake rose 17.2 per cent. 

  Market observers note that while FPIs' influence may be gradually waning amid surging domestic liquidity, they remain market movers and price-setters. In contrast, domestic institutional investors (DIIs) are largely viewed as price takers, contributing stability to the system. 

 

As of June 2025, FPIs’ share in India’s total market capitalisation dropped to 17.04 per cent—a 13-year low—from 17.22 per cent at the end of March 2025, even as net FPI inflows during the quarter stood at Rs 38,674 crore.

 

Notable stocks that saw significant FPI inflows included Vishal Mega Mart (FPI holding up 582 basis points; share price up 28.5 per cent), South Indian Bank (FPI holdings up 562 bps; price up 33.5 per cent), and Paradeep Phosphates (FPI holdings up 680 bps; share price up 70 per cent). On the flip side, key stocks with the steepest decline in FPI holdings—such as Hi Tech Pipes (FPI cut 726 bps; stock down 1 per cent) and Balaxi Pharma (FPI cut 716 bps; stock down 22 per cent)—notably underperformed the market.