Goldman Sachs names 12 alpha picks as foreign ownership crashes to a 14-year low, but warns earnings, not oil, will decide when the money comes back
Record FII Outflow Breaks a 25-Year Mark
On May 10, 2026, Goldman Sachs released an India strategy report titled “Outflows Fade, But Re-entry Waits,” warning that FIIs have already sold $22 billion worth of Indian equities in 2026, surpassing the previous annual sell-off record of $19 billion seen in 2025, the worst in over 2.5 decades.
The scale goes beyond the annual number. On a rolling 250-day window, the current sell-off stands at $30 billion, close to the trough range of $28–32 billion seen during the 2022 global tightening cycle. And since the September 2024 market peak, foreigners have sold a cumulative record $53 billion of Indian equities.
The sell-off at 0.9% of market cap has surpassed the outflows of the 2009 Global Financial Crisis, though it remains below the 1% threshold breached during the 2022 global tightening cycle. If current outflows hit 1% of market cap, that would imply $4 billion of incremental selling, according to Goldman’s Timothy Moe, co-head of Asia macro research.
Foreign Ownership Hits a 14-Year Low — Below DIIs for First Time in 20 Years
Foreign ownership in Indian equities dropped to a 14-year low in Q1 CY2026, slipping below domestic institutional ownership for the first time in over two decades. That is a structural shift, not just a flow statistic.
What held the floor? Domestic institutions. Net inflows into equity-oriented mutual fund schemes totalled ₹405 billion in March 2026, the highest since July 2025, with SIP collections reaching ₹32,087 crore in March 2026 alone, per AMFI data. India’s mutual fund industry has reported monthly SIP inflows above ₹30,000 crore consistently through early 2026, reinforcing steady domestic participation even as equity markets faced heavy volatility. Retail money absorbed what foreign funds threw at the exit. That’s not a coincidence, it reflects a structurally deeper domestic investor base than existed in any prior FII exodus.
Why FIIs Are Not Coming Back Yet — Even If Oil Falls
Also Read: FII DII Data Today: Live Cash & F&O on NSE/BSE
Goldman’s report is explicit about this, and it matters. Empirical evidence shows that FII flows do not immediately return when oil prices fall. Foreign capital did not return to Indian equities during the early-April oil price correction, despite significant selling during the preceding oil rally in March. The report added that investor concerns over the potential impact of artificial intelligence on market positioning and earnings expectations have also contributed to the shift in global capital flows toward North Asian markets.
The more decisive blocker is earnings. Earnings revisions have become an increasingly important variable guiding foreign flows in Indian equities, Goldman said. India currently offers a less attractive risk/reward compared to North Asian markets, as it trades at significantly higher growth-adjusted valuations.
That last point deserves unpacking. Goldman is not saying India is broken; it’s saying the price of entry is too high relative to what earnings are likely to deliver in the near term. Until forward earnings estimates stabilise and begin revising upward, foreign reallocation to India will stay on hold regardless of oil, rupee, or macro noise.
The 12 Stocks Goldman Is Backing Anyway
For medium-term investors who can weather near-term uncertainty, Goldman suggests scouting for stocks where foreign ownership and positioning is light, names it believes will likely outperform when foreign sentiment improves. The 12 stocks are: Hindustan Unilever, Larsen & Toubro, Bajaj Auto, Bank of Baroda, Trent, Solar Industries India, Siemens, Bajaj Holdings & Investment, Bosch, Swiggy, One 97 Communications (Paytm), and MRF.
The selection logic is specific. Goldman screened within the BSE200 universe, excluded sell-rated stocks, and filtered for names with low FPI positioning and low earnings sensitivity to oil price shocks. Among these, Swiggy and Trent are already trading 31–39% below their 52-week highs, while Bajaj Holdings, Bank of Baroda, MRF, and Paytm are down 12–27% from peak levels.
The thesis: if foreign ownership is already minimal in these names, incremental FII selling pressure is limited. When the re-entry cycle eventually begins, stocks with the lightest foreign positioning tend to see the sharpest moves up, precisely because there’s more room to fill.
How Much More Selling Is Left?
Goldman estimated the downside risk of further foreign selling at around $4–5 billion in the near term, adding that various measures of flows, positioning, and ownership trends suggest that foreign flows are now close to downside scenarios.
That is a manageable number given $53 billion has already been absorbed since September 2024. The firm’s base case is that the bulk of the damage is done. The risk, though, is not another wave of FII selling; a meaningful return of foreign capital could still take time due to expensive valuations, weak earnings visibility, and global investor preference for North Asian markets. A flat market is its own kind of frustration for investors who bought expecting a recovery.
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FAQ
Q: Which 12 stocks did Goldman Sachs pick for India in 2026?
Goldman named Hindustan Unilever, Larsen & Toubro, Bajaj Auto, Bank of Baroda, Trent, Solar Industries India, Siemens, Bajaj Holdings & Investment, Bosch, Swiggy, Paytm (One 97 Communications), and MRF, all selected from the BSE200 universe for low FPI positioning and low oil-shock earnings sensitivity.
Q: Is it safe to invest in Indian stocks despite the FII sell-off in 2026?
Goldman estimates the remaining downside from further FII selling is limited to $4–5 billion. The structural support is real: SIP collections hit ₹32,087 crore in March 2026, and domestic institutions have absorbed record outflows without a market collapse. Risk remains, but the asymmetry for medium-term investors in low-FPI-ownership names has improved.
Q: What will trigger FII re-entry into Indian equities?
Goldman is direct: earnings revisions have become the most important variable guiding foreign flows in Indian equities. Oil price drops have already proven insufficient. The re-entry clock starts when Q4 FY2026 earnings reports, due through May and June, show evidence of an upward revision cycle beginning, particularly in large-cap financials, consumption, and industrials.
All data in this article is sourced directly from Goldman Sachs’ May 10, 2026 strategy report “Outflows Fade, But Re-entry Waits,” corroborated by ANI, Business Standard, Business Today, and AMFI data through March 2026.
