Financial Services Emerge as the Dominant Sector in FII Flows
In the second half of April, foreign institutional investors (FIIs) injected a robust ₹38,000 crore into Indian equity markets, marking one of the strongest fortnightly buying sprees since 2020. At the forefront of this capital infusion was the financial services sector, which attracted an overwhelming ₹22,910 crore—more than 60% of total FII inflows during the period. This surge underscores the growing confidence among global investors in India’s banking, insurance, and fintech landscape, which has shown resilience amid global macroeconomic uncertainty.
Market analysts attribute the heavy inflows to strong earnings from major private sector banks, favourable interest rate dynamics, and ongoing financial inclusion reforms that have continued to improve credit quality and profitability metrics across the sector. Leading stocks such as HDFC Bank, Kotak Mahindra Bank, and ICICI Bank saw increased FII participation during this time frame.
Highlights:
Financial services sector led with ₹22,910 crore in FII inflows in late April.
Over 60% of total foreign equity investments were concentrated in this segment.
Strengthening earnings outlook and financial reforms attracted foreign interest.
HDFC Bank, ICICI Bank, and Kotak Mahindra Bank remained key beneficiaries.
Capital Goods Sector Rebounds After Early April Outflows
Following a subdued start to April, the capital goods sector witnessed a sharp reversal in FII sentiment, emerging as the second most preferred destination for overseas funds. The sector received net inflows of ₹2,944 crore in the second half of the month, recovering from net outflows of ₹3,019 crore during the earlier fortnight. This shift reflects renewed optimism in India’s infrastructure-led growth story, with increased capital expenditure by both the public and private sectors.
Stocks within engineering, heavy electricals, and industrial automation segments were key targets for foreign investors. Improved order books, government-led investment in railways and defense manufacturing, and increasing export competitiveness played a pivotal role in restoring FII appetite for this segment.
Highlights:
Capital goods received ₹2,944 crore in FII inflows after a negative first half.
Renewed government focus on infrastructure spurred investor confidence.
Positive revisions in capex guidance from industrial firms aided sentiment.
Engineering and heavy electrical equipment stocks saw increased activity.
Telecom Sector Sees Sustained Interest with Over ₹2,500 Crore Inflows
Telecommunications retained its appeal among foreign investors, garnering more than ₹2,500 crore in FII inflows in the second half of April, up from ₹2,137 crore in the first half. The sector continues to benefit from structural reforms, improving ARPU (Average Revenue Per User), and rapid 5G expansion across India’s urban and semi-urban markets. Reliance Jio and Bharti Airtel, the two largest players in the space, remain central to this narrative.
Strategic investments in network infrastructure and consistent revenue growth have positioned telecom as a key long-term growth sector, particularly amid rising data consumption and digital payments penetration.
Highlights:
Telecom sector drew over ₹2,500 crore in FII flows during late April.
Bharti Airtel and Reliance Jio attracted strong foreign participation.
Sector tailwinds include 5G rollout, rising ARPU, and digital ecosystem growth.
Improved policy clarity and capex efficiency boosted sentiment.
Secondary Sectors Also Witness Recovery in FII Sentiment
Beyond the top three, sectors such as oil & gas and FMCG saw meaningful inflows, with ₹2,401 crore and ₹2,330 crore, respectively. The energy sector’s performance was supported by firm crude oil prices and strong refining margins, while FMCG benefited from rural recovery signs and margin improvements due to easing input costs.
FIIs also resumed buying in consumer, chemicals, services, and consumer durables sectors. Consumer discretionary and chemicals, previously under pressure due to global demand concerns, witnessed inflows of ₹1,983 crore and ₹1,184 crore, respectively. Services and consumer durables attracted ₹983 crore and ₹965 crore, signaling a broader shift toward consumption-led themes.
Highlights:
Oil & gas and FMCG attracted ₹2,401 crore and ₹2,330 crore, respectively.
Consumer discretionary and chemicals sectors rebounded with strong inflows.
FIIs rotated capital into services and durable goods on domestic demand strength.
Input cost moderation and export opportunities supported mid-cap consumer names.
Outflows Persist in IT, Auto, and Metals Amid Earnings and Global Headwinds
Despite the overall bullish trend, FIIs continued to pare exposure to information technology, automobile, and metal & mining sectors. IT stocks, which had faced a massive sell-off of ₹13,828 crore in early April, saw an additional ₹1,385 crore in outflows in the latter half. Persistent concerns around weak discretionary tech spending in the US and Europe weighed heavily on large-cap software exporters.
Auto and metals saw selling pressure of ₹645 crore and ₹574 crore, respectively, reflecting cyclical concerns, input price volatility, and slower export demand. Real estate and construction sectors also remained under pressure with net outflows of ₹353 crore and ₹425 crore, respectively, likely due to high interest rates and elevated inventory levels in urban markets.
Highlights:
IT sector continued to see outflows, totaling ₹1,385 crore in second half.
Auto and metals faced net selling amid macro and export demand concerns.
Real estate and construction remained weak on interest rate and inventory worries.
Caution persists in cyclical sectors as global uncertainty lingers.
