FIIs Pull Back Sharply: IT, Financial & Energy Stocks Bear the Brunt

Foreign institutional investors (FIIs) significantly offloaded Indian equities recently, focusing on key sectors such as IT, financials, oil & gas, realty, and consumer goods. Rising global uncertainty, valuation concerns, and weak corporate earnings led to heavy selling, amounting to ₹14,400 crore in IT alone over the last two weeks of the month.

Sectors Under Pressure

Over ₹14,400 crore was withdrawn from IT stocks in late July, the sharpest retreat in about a year. Financial stocks also suffered with net outflows exceeding ₹6,700 crore. Energy and oil & gas names recorded selling over ₹4,177 crore, while real estate saw exits worth ₹3,684 crore. FIIs sold over ₹2,425 crore in auto stocks and ₹1,322 crore in consumer durables during the second half, after offloading ₹1,160 crore and ₹1,292 crore, respectively, in the first half of the month.

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What’s Driving the FII Exodus?

Market watchers attribute the shift to multiple global forces: 

• Disappointing Q1 corporate earnings 
• U.S. tariff rhetoric
• A weakening rupee 

The overvaluation of Indian stocks relative to emerging market peers and rising U.S. yields further dampened appetite. Elevating geopolitical and macroeconomic risks also weighed heavily on sentiment.

Domestic Institutions Hold the Fort

Till date in August 2025, Foreign Institutional Investors (FIIs) are net sellers to the tune of ₹5,955.40 crore worth of shares in Indian equities, while domestic institutional investors (DIIs) net bought ₹11,413.60 crore worth of shares, according to provisional NSE data.

Market Impact & Outlook

The Nifty closed below the 24,600 mark, slipping 75 points to end at 24,574, while the Sensex fell 166 points to settle at 80,544. The broader market saw mixed trends with the Nifty Bank index gaining 51 points to 55,411, while the Nifty Midcap index fell sharply, losing 457 points to close at 56,750.

Analysts caution that August, historically weak for markets, could bring further deterioration given elevated short positions, flagging investor sentiment, and uncertain global outlook. Even if markets stabilise, FIIs may only re-enter once earnings, valuations, and macro signals improve.

Conclusion

FIIs have turned cautious on India, unloading shares worth tens of thousands of crores across key sectors. Despite domestic purchases, the overall outflow has weighed heavily on the market. With bearish sentiment driven by tariffs, currency weakness, and muted earnings, markets may remain under pressure until stability returns to valuation and economic cues.