India's Stock Market Seen as Cheap Opportunity as Foreign Investor Holdings Dip

Foreign institutional investors (FII) have reduced their stakes in India's top 10 listed companies to the lowest level since the 2008 global financial crisis, now holding just 34% of the free‑float market cap of these firms. As a result, large‑cap stocks such as Infosys, TCS, HDFC Bank and Reliance are trading well below their ten‑year average price‑to‑earnings multiples, offering a rare discount in the Indian market.

A DSP Mutual Fund report notes that, while the MSCI Emerging Markets index has returned to 2021 levels, India’s valuation is about 2.4% below its long‑term average, unlike Taiwan and South Korea, which trade at significant premiums. The index’s performance is driven largely by three semiconductor firms—TSMC, Samsung Electronics and SK Hynix—making the index sensitive to AI‑related semiconductor sentiment. Analysts suggest that a shift of capital from foreign investors back into Indian technology shares could trigger a fresh inflow of funds, positioning India as a contrarian investment destination amid broader geopolitical easing and a stronger rupee.