Financials, FMCG, and Auto Stocks See Outflows, While Telecom and IT Gain

Foreign Portfolio Investors (FPIs) persisted with their selling streak for the third consecutive month in February 2025, pulling out a total of ₹34,574 crore from the Indian equity markets, as per data from the National Securities Depository Limited (NSDL). The first half of the month saw significant outflows of ₹21,272 crore, although selling pressure eased slightly in the latter half, with net withdrawals amounting to ₹13,302 crore.

This trend has continued into March, with FPIs offloading Indian stocks worth ₹22,114 crore in the initial four trading sessions, according to NSDL data.

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Factors Driving FPI Outflows

Vipul Bhowar, Senior Director - Listed Investments at Waterfield Advisors, attributed the sustained outflows to stretched valuations in the Indian stock market and uncertainty surrounding corporate earnings growth. “The third-quarter earnings for the fiscal year 2025 have been moderate, creating an uncertain environment. Furthermore, forward earnings revisions have faced challenges, with downgrades outpacing upgrades, particularly for companies outside the Nifty 50 index,” he explained.

Sectoral Trends: Financial Services and FMCG Hit Hardest

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

Other sectors that faced significant selling pressure included:

Capital Goods: Net outflows of ₹4,464 crore
Automobile & Auto Components: Withdrawals of ₹3,969 crore
Construction Materials: Outflows of ₹3,844 crore
Oil, Gas & Consumable Fuels: Net selling of ₹3,377 crore
Power: Withdrawals totaling ₹3,086 crore
Consumer Services & Consumer Durables: Outflows of ₹2,857 crore and ₹2,290 crore, respectively

The healthcare sector initially attracted ₹1,534 crore in the first half of February but turned into a net loser by the end of the month, with FPIs pulling out ₹2,996 crore in the latter half. This resulted in an overall outflow of ₹1,462 crore for the sector.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted an interesting paradox in FPI behavior. “Despite financial services being a strong-performing sector with attractive valuations, FPIs are selling heavily in this space. This trend seems driven by their preference to shift funds to Chinese equities, where valuations are comparatively lower. However, in doing so, they are offloading some of the best-performing stocks in India,” he remarked.

Selective Buying: Telecom and IT Attract FPI Interest

Despite widespread selling, certain sectors saw net inflows. The telecommunications sector stocks emerged as the biggest beneficiary, attracting ₹7,998 crore from FPIs in February. Information technology (IT) stocks also witnessed selective buying, with net inflows of ₹805 crore.

Additionally, smaller investments flowed into the following sectors:

Chemicals: ₹429 crore
Media & Entertainment: ₹22 crore
Textiles: ₹33 crore

While FPIs continue to pull funds from Indian markets, selective buying in telecom and IT suggests that investors are still finding value in specific sectors amid broader market concerns.