FPIs Return to Financials in June First Half On RBI’s Rate Cut; IT, Power See Sustained Outflows

Foreign portfolio investors have once again turned to their favourites, the financial services sector during the first half of June, resuming capital injection into the sector after a brief pause. The sector emerged as the top pick, amassing ₹4,685 crore in FPI inflows, a reversal from the ₹700 crore pulled out in the second half of May, according to the data available on NSDL. This resurgence came even as FPIs overall remained net sellers in the broader market, withdrawing ₹5,402 crore from Indian equities in the same period.

Despite this inflow, both Nifty Bank and Nifty Financial Services indices barely moved the needle, reflecting the persisting risk aversion in the overall market. Financial services stocks had sparked a rally earlier in the month, riding high on the Reserve Bank of India’s larger-than-expected 50-basis-point cut in the interest rate and a surprise 100-basis-point cash reserve ratio slash. Expectations of a recovery in credit and improved earnings for banks briefly lifted the sector, until concerns around margin pressures weighed in the second week. The Nifty Bank index moved 2% higher in the first nine days of June, before erasing all these gains in the days that followed.

Beyond banking, other sectors that joined the FPI favorites club were oil and gas and chemicals sectors. They drew ₹1,199 crore and ₹1,405 crore, respectively, as foreign capital poured in the first half of June. These sectors also saw a spike in overseas interest compared to the final fortnight of May. Oil stocks, in particular, have been on a rollercoaster ride, driven by geopolitical tensions in West Asia.

With oil prices moving wildly on the back of US-Iran standoffs and Israeli strikes, oil stocks have seen a volatile phase lately. Just like the financial services index, Nifty Oil & Gas index has also given mild returns in the first half of the ongoing month.

On the flip side, the capital goods sector saw its FPI inflow nearly slashed in half, dropping to ₹1,191 crore from ₹3,094 crore in the last fortnight of May.

Meanwhile, FMCG and power stocks faced the full brunt of FPI displeasure, witnessing a combined outflow of ₹6,746 crore. The FMCG sector alone lost ₹3,626 crore, likely weighed down by a combination of spiking crude prices and heatwaves across North India. Even though consumer inflation data has looked promising, sentiment was clearly soured.

Reports around fall in power demand in India could have triggered an FPI selloff in the power sector in the first half of the month. Power demand fell 4% on year in May to 149 billion units (BUs), as average temperature in May was low due to unseasonal rainfall, according to a report by CRISIL.

Now there is a tech story—once a darling, now in the ruins. While IT wasn’t among the biggest losers in the first half of June alone, it has suffered the largest FPI outflow in 2025 thus far. A whopping ₹33,479 crore has been pulled out from the sector this year, which is also visible in its sectoral performance. The Nifty IT index has lost over 11% in 2025, due to subdued guidance from top IT firms for the ongoing fiscal, amid tariff tensions. An expected slowdown in clients’ discretionary spending and broader economic uncertainty cooled the appetite of foreign investors for the sector. IT accounted for a third of the net FPI outflow from Indian equities in 2025.

FPIs have also pulled out a staggering amount from the pockets of the automobile sector. It saw a net FPI outflow of Rs 16,058 crore in the year so far. Other sectors under the sell-off burden were consumer facing sectors such as FMCG, consumer services and consumer durables.

In contrast, telecom and financial services have had a relatively cheerful year in terms of foreign flows.