FPIs favour Healthcare, IT, Consumer Sectors in August, continue offloading financial services stocks

Foreign portfolio investor (FPI) inflows into the Indian stock market saw a significant slowdown in August, with most investments directed towards consumption-related sectors, including consumer durables, consumer services, fast-moving consumer goods (FMCG), and healthcare.

FPI investments in domestic equities amounted to just ₹7,322 crore in August, a sharp decline from ₹32,359 crore in July and ₹26,558 crore in June, according to data from the National Securities Depository Limited (NSDL).

The key driver behind this deceleration was the elevated valuation of the Indian market. With the Nifty 50 trading at over 20 times estimated FY25 earnings, India now ranks as the most expensive market globally.

Despite continued FPI purchases through the ‘primary market and others’ category, foreign investors have remained consistent sellers in the cash market due to the high valuations, according to analysts.

However, in September, foreign portfolio inflows into Indian equities have remained robust, with ₹14,054 crore recorded so far. This continued strength is largely attributed to the resilience of the Indian market, despite global uncertainties.

What are FPIs Buying?

In August, the healthcare sector emerged as the largest beneficiary of foreign portfolio investments (FPI), with inflows totaling ₹5,831 crore, building on ₹5,054 crore received in July, according to data from NSDL.

The consumer durables sector followed with FPI inflows of ₹4,713 crore, while the consumer services sector attracted ₹4,158 crore in August, up from ₹3,429 crore in July.

The information technology (IT) sector also drew significant FPI inflows amounting to ₹4,036 crore in August, although lower compared to the ₹11,763 crore received in July. Additionally, the fast-moving consumer goods (FMCG) and telecommunications sectors saw notable FPI inflows of ₹3,600 crore and ₹2,061 crore, respectively, as per NSDL data.

What are FPIs Selling?

Heavy FPI selling persisted in the financial services sector, with outflows of ₹12,008 crore in August, following ₹7,648 crore in July.

The metals and mining sector also experienced substantial FPI outflows of ₹3,773 crore, after a withdrawal of ₹7,310 crore in July.

Further outflows were observed in the automobile and auto components sector, with FPIs selling ₹2,379 crore worth of stocks, and in the construction materials sector, which saw outflows of ₹1,142 crore in August.

The divergence in FPI activity — strong inflows into consumption-driven sectors and persistent selling in financial services — suggests that foreign investors are selectively allocating capital, focusing on sectors with growth potential while avoiding those with elevated valuations. Meanwhile, the continued inflows in September reflect sustained confidence in India’s economic stability amidst global uncertainties.

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