Foreign Portfolio Investors (FPIs) have shown a strong preference for Indian financial stocks, pouring significant capital into the sector during the second half of June. This surge in buying reversed earlier outflows, though it didn't prevent a continued monthly decline in overall FPI ownership of Indian equities.
Financial Sector Leads FPI Inflows
Data from the central securities depository NSDL reveals that the financial sector alone attracted Rs 14,634 crore in FPI buying in the latter half of June. This concentrated inflow accounted for most of the net foreign investment of Rs 14,109 crore into domestic equities during that period. The reversal was notable, especially after FPIs had sold Rs 11,263 crore worth of financial stocks in the first fortnight of June.
Despite this renewed interest, FPI ownership of Indian stocks fell to 14.2 percent in June 2026, a stark contrast to 20 percent recorded in June 2016. In parallel, domestic institutional investor (DII) ownership has steadily grown, reaching 18.7 percent by March 2026, as noted by JM Financial.
Other Sectors Attracting FPIs
Beyond financials, FPIs also directed capital into several other sectors in the second half of June:
- Construction: Rs 3,484 crore
- Consumer Services: Rs 3,081 crore
- Services: Rs 2,592 crore
- Consumer Durables: Rs 2,564 crore
- Real Estate: Rs 1,893 crore
- Healthcare: Rs 1,435 crore
Analyst Views on Financial Stocks
Emkay Global has expressed a preference for small and mid-sized private banks, specifically highlighting IDFC First Bank and RBL Bank. The brokerage, however, advises caution with larger private lenders and public sector banks. While ICICI Bank Ltd is recognized as a strong franchise, its valuation at 2.4 times book value suggests limited upside. HDFC Bank Ltd and Axis Bank Ltd are considered relatively inexpensive but require consistent growth to unlock their potential. Kotak Mahindra Bank Ltd, despite showing growth, faces concerns regarding its conservative approach, capital drag, and recent management changes.
For non-banking financial companies (NBFCs), Kotak Institutional Equities anticipates strong June quarter earnings. They project core profit before tax to rise by 22-58 percent and overall earnings by 12-69 percent year-on-year. This positive outlook is attributed to robust loan growth, stable asset quality, and year-on-year net interest margin expansion due to a higher borrowing-cost base in the previous year. Analysts expect positive commentary and guidance upgrades as liquidity improves and fuel price overhang eases.
Sectors FPIs Continue to Avoid
While financials saw a boost, FPIs continued to pull funds from other key sectors. Metals and mining remained the biggest laggards, experiencing outflows of Rs 4,371 crore in late June. Power stocks saw outflows of Rs 3,743 crore, and oil & gas stocks witnessed a reduction of Rs 2,789 crore.
Overall, despite the turnaround in the second half, FPIs remained net sellers for June, extending their selling streak to a fourth consecutive month. They sold equities worth Rs 29,170 crore during the month. This occurred even as the Nifty 50 index gained 1.4 percent in June, after a 1.9 percent decline in May.