Foreign institutional investors extended their selling streak to a fourth month in June, withdrawing Rs 29,170 crore from Indian markets. While foreign funds offloaded shares in auto, IT, and metals, they increased their exposure to the banking and financial services sector. Domestic institutions played a stabilizing role, purchasing Rs 85,800 crore to offset the foreign outflows.
Foreign institutional investors continued to reduce their exposure to Indian equities in June, marking the fourth consecutive month of net selling. During the month, foreign investors pulled out a net total of Rs 29,170 crore from the secondary market. Despite this sustained selling pressure, the domestic institutional investors provided significant support to the market by injecting Rs 85,800 crore, which helped the Nifty index maintain a modest gain of 1.4% for the month.
Banking Sector Remains a Bright Spot
While foreign investors were net sellers across many segments, they showed a clear preference for the banking and financial services sector, commonly known as BFSI. This sector attracted net inflows of $357 million during June, emerging as the top destination for foreign capital. This buying interest raised the BFSI sector's total share in foreign assets under custody in India to 30.8%, up from 29.5% in the previous month. Other sectors that managed to see foreign inflows included consumer durables, services, and real estate.
Heavy Outflows in Auto and Technology
On the other side of the ledger, significant divestment was seen in sectors that had previously been major components of foreign portfolios. The oil and gas sector faced the most aggressive selling, with outflows amounting to $1.40 billion. The auto sector was also heavily impacted, seeing $1.10 billion in net sales, while the information technology and metals sectors witnessed outflows of $788 million and $961 million, respectively. Power stocks also saw divestment totaling $668 million.
Primary Market Resilience
Despite the caution shown in the secondary market, foreign investors continued to show interest in India's primary market, which includes initial public offerings and follow-on share sales. In June, foreign investors added Rs 6,000 crore through new issuances, even while withdrawing a much larger sum from existing listed stocks. This pattern highlights a distinction between foreign investors' concerns over current valuation levels in secondary markets and their continued long-term optimism regarding new Indian business listings. Over the past year, foreign capital participation in these primary offerings has totaled Rs 72,800 crore. As the market progresses, investors may monitor whether this trend of domestic institutions absorbing foreign selling continues and if foreign interest in the primary market remains robust despite global economic volatility.