Foreign Investors Return to India With Targeted $3B Bet
Foreign institutions have ended a four-month selloff with a $3 billion injection into Indian equities, but the targeted nature of the buying suggests a tactical shift rather than a structural reallocation.
Foreign institutional investors deployed $3 billion into Indian stocks last month, halting a sustained four-month selling streak. The capital injection was highly concentrated, with just five sectors absorbing more than the total net inflow as investors simultaneously pulled money from other areas of the market.
NSDL data shows financial services attracted the heaviest buying at ₹16,609 crore, followed by consumer services and healthcare. Conversely, foreign investors exited automobiles to the tune of ₹8,260 crore, while power, capital goods and telecommunications also saw significant outflows. Information technology and consumer staples were largely ignored, with IT posting a net outflow of ₹673 crore.
The heavy weighting toward financials reflects a specific valuation thesis. Viraj Gandhi, chief executive officer of SAMCO Mutual Fund, pointed to private banks trading at 1.8 to 2.2 times book value, well below historical averages of 3.1 to 3.9 times. With return on equity between 15% and 18%, accelerating credit growth and non-performing assets at historic lows, Gandhi argued this represents “a rare combination of cyclical momentum and structural profitability that justifies multiple expansion.”
The deployment was not static across the period. Financial buying slowed from ₹14,634 crore in late June to ₹1,975 crore in early July, while consumer services and healthcare accelerated. Meanwhile, metals swung from a ₹4,371 crore outflow to a ₹5,993 crore inflow as the month progressed. This rotation tracks an improving earnings outlook for domestic-facing businesses like banking and pharmaceuticals, even as IT faces downgrade risks from weak global demand.
The renewed interest is partly a function of capital retreating from crowded trades elsewhere. Abhay Laijawala, managing director and chief investment officer for India at Lighthouse Canton, noted that foreign investors had previously drained India to fund an AI-driven rally in Taiwan and South Korea. “That trade is now
