RIL, ITC, TCS, L&T, Infosys among top 10 under-owned stocks amid 2-decade low FII positioning

DSP Mutual Fund, in its monthly Netra report, said India's 10 largest companies are the most under-owned on record. It noted that the combined market capitalisation of these 10 stocks, including Reliance Industries Ltd (RIL), Tata Consultancy Services Ltd (TCS), HDFC Bank Ltd and Bharti Airtel Ltd, now accounts for just 17 per cent of the total BSE market capitalisation, down from 39 per cent at the peak in December 2019.

"One of the key drivers of this under-ownership has been the steady reduction in FII holdings in these companies. The average FII ownership across the top 10 companies has fallen to just 34 per cent of free-float market capitalization. This is the lowest level in two decades, and even below the trough (37 per cent) reached during the Global Financial Crisis. 

DSP said the under-ownership and undervaluation at present makes this high-quality segment attractive for long term investors. As rupee depreciation stabilises and geopolitical risks subside, DSP said there can be mean reversion in FII flows.

Among top 10 stocks, FII ownership in Axis Bank as a percentage of free-float m-cap has fallen to 44 per cent at the end of March quarter against 68 per cent at the end of June 2014. Bharti Airtel's FII ownership at 54 per cent is off its March 2009's 63 per cent. FII ownership at 38 per cent in HDFC Bank is against 44 per cent ownership in the private lender in 2014. ITC's FII ownership at 12 per cent is against 19 per cent in June 2024. 
FII ownership as percentage of free cash flow stood at 36 per cent from Kotak Mahindra Bank. IT stood at 60 per cent in March 2009 and 51 per cent as recent as December quarter of 2023. In RIL, FII ownership at 36 per cent is against 47 per cent in December 2019. TCS' ownership at 34 per cent is off its June 2014 high of 63 per cent.

MOFSL in a note said nearly two years of range-bound performance in Indian equities and a strong rally in global markets have widened the performance gap to near-historic levels. It said India's valuation premium over EM has compressed to a historic low of 18 per cent in June 2026, significantly below its long-term average of 73 per cent and 2022 peak of 147 per cent.

India's underperformance, following its status as one of the world's best-performing equity markets between 2020 and 2024, has been difficult to reconcile with its strong underlying fundamentals. A key factor has been the sharp global capital rotation toward a narrow group of AI-driven Big Tech companies and related technology beneficiaries, which has left non-AI markets, such as India, bearing the brunt of this shift.

While the AI-driven rally may persist, the unprecedented concentration of capital among a limited set of beneficiaries over a short period appears to present greater risks than opportunities. 

"In contrast, India's prolonged period of relative underperformance has led to more attractive valuations and positioning. Any broadening of global market leadership or rotation away from AI-centric trades toward a wider range of sectors and markets is likely to serve as a meaningful tailwind for Indian equities," MOFSL said.