FPI Exodus: Financials, FMCG, Auto sectors lead outflows in February; Telecom, IT stocks buck the trend

Foreign Portfolio Investors (FPIs) continued their selling spree for the third straight month in February 2025, withdrawing a total of ₹34,574 crore from the Indian stock market, according to data from the National Securities Depository Limited (NSDL). While the first half of the month saw an outflow of ₹21,272 crore, the selling pressure eased slightly in the second half, with net outflows amounting to ₹13,302 crore.

In the first four trading sessions of March, FPIs have offloaded Indian equities to the tune of ₹22,114 crore, NSDL data showed.

“Elevated valuations of Indian equities, alongside concerns about corporate earnings growth, have led to a sustained outflow of FPIs. The earnings reports for the third quarter of fiscal year 2025 have been modest, indicating an atmosphere of uncertainty. Revisions to forward earnings have struggled, with downgrades outpacing upgrades, particularly among companies outside the Nifty 50 index,” said Vipul Bhowar, Senior Director – Listed Investments, Waterfield Advisors.

Sectoral Trends: Broad-Based Selling Continues

The data reveals that FPIs were net sellers across most sectors, with financial services experiencing the highest outflows in February. FPIs offloaded financial services stocks worth ₹6,991 crore, followed closely by the fast-moving consumer goods (FMCG) sector, which saw net outflows of ₹6,904 crore.

Significant selling was also observed in the capital goods sector, with FPIs withdrawing ₹4,464 crore, while the automobile & auto components sector recorded outflows of ₹3,969 crore. The construction materials and oil, gas & consumable fuels sectors witnessed FPI outflows of ₹3,844 crore and ₹3,377 crore, respectively, according to NSDL data.

Additionally, the power sector saw net selling of ₹3,086 crore, while the consumer services and consumer durables sectors recorded outflows of ₹2,857 crore and ₹2,290 crore, respectively.

Notably, the healthcare sector, which attracted ₹1,534 crore in the first half of the month, turned into a net loser by the end of February, with FPIs pulling out ₹2,996 crore in the latter half, leading to a total outflow of ₹1,462 crore.

“An important paradox in FII selling is that they are selling heavily in financial services – the sector which is doing well and the valuations are attractive. FIIs are focused on selling in India because valuations in India are high and moving money to Chinese stocks where valuations are much lower. But in the process, they are selling in the best performing sector with attractive valuations,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Selective Buying in Telecom, IT

Amid the broad-based selling, the telecommunications sector stood out as the biggest beneficiary, with FPIs investing a net ₹7,998 crore during February. Information technology (IT) stocks also saw a net inflow of ₹805 crore, indicating some selective buying interest.

Other sectors that saw marginal inflows included chemicals ( ₹429 crore), media & entertainment ( ₹22 crore), and textiles ( ₹33 crore).

Stock Market Outlook

According to V K Vijayakumar, when FIIs come back to India they are likely to buy the same banking stocks that they are selling now. He noted that FIIs are putting money in India through the ‘primary market and others’ category where valuations are moderate. In 2024 FIIs invested ₹1,21,637 crore through the ‘primary market and others’ category.

“The latest GDP figures indicate that economic growth is rebounding in India. If corporate earnings follow suit the market will rebound and FIIs are likely to turn buyers. This will happen when leading indicators suggest a turn around in corporate earnings,” Vijayakumar said.

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