Foreign investors turn net buyers in June’s second half, led by financial stocks

Foreign investors, who resumed buying Indian debt in June, have extended that renewed interest to equities in July. After several months of continuous selling, foreign portfolio investors (FPIs) have become net buyers this month, investing $2.59 billion (Rs 24,662 crore) during the first 10 days of July.

Foreign investors poured more than $1 billion into Indian equities last week, with Goldman Sachs Group Inc. predicting further inflows as a stable currency and improved earnings expectations prompt funds to add to their holdings.Global funds were net buyers of $1.3 billion of Indian equities in the four days through July 9, set to be the biggest weekly purchase since at least June last year, according to data compiled by Bloomberg. They bought an additional $272 million worth of local shares on Friday, provisional data showed. 132359870“India’s outlook has improved in recent weeks, amid lower commodity prices, stabilized currency, resilient domestic growth, healthy earnings expectations in 2Q, and potential recovery in select domestic pockets,” Goldman Sachs strategists including Amorita Goel wrote in a note dated July 11. “With ultra-light foreign positioning, we see ample room for flows to return.”The return of foreign investors may help sustain a tentative recovery in the benchmark NSE Nifty 50 index, which has rebounded about 8% since hitting a one-year low in April, as easing oil prices and a stable rupee boost the outlook for corporate earnings. Last week, Citigroup Inc. said Indian equities offer a favorable risk-reward as valuations remain reasonable as earnings estimates have held up.Even though foreign investors have been net buyers of Indian stocks for four consecutive weeks, they remain net sellers of about $27 billion worth of equities this year, data showed.

Foreign investors have returned to Indian markets, showing renewed interest in equities during July. This shift follows months of consistent selling, with significant inflows recorded in early July. Equities have become the primary destination for foreign capital, attracting substantial investments. Debt markets also continue to see inflows, extending momentum from previous months. Stronger economic fundamentals and a stable currency are contributing to this positive investment trend.

DII inflows touched a record $ 162 billion during Oct'24-Jun'26, while FII flows turned net positive at $1.3 billion in the second half of June, indicating improving sentiment."

The renewed interest in financial stocks helped overseas investors emerge as net buyers of Indian equities worth more than Rs 14,000 crore during the June 16-30 period, reversing net outflows of Rs 63,450 crore recorded in the first fortnight of the month, according to NSDL data.

Mumbai: Foreign investors returned to financials in the second half of June, buying shares worth ₹14,634 crore after pulling out ₹11,263 crore in the first part of the month, boosted by inflows linked to global equity index rebalancing and value purchases. This is their highest fortnightly purchase in financials in 2026 and the first since the second half of February.The renewed appetite for financials helped overseas investors turn net buyers of Indian equities worth more than ₹14,000 crore during June 16-30, reversing net sales of ₹63,450 crore in the first half of the month, according to NSDL data."FIIs turned net buyers in banks and financials after three consecutive months of record outflows. Part of these inflows can be attributed to FTSE June '26 review and the rest to some active buying," said Sriram Velayudhan, senior vice-president at IIFL Capital Services, in a note.Financial stocks have seen the highest outflows in the past year as their dominant presence in India's stock market made them most vulnerable to foreign institutions' risk-off sentiment towards India. With the West Asia conflict showing signs of ending in mid-June, overseas investors' selling in Indian equities has eased, with flows trickling into select pockets like banks and financials.132227992"The financial services sector makes up nearly 40% of the index, and, naturally, that would get large flows since it is a large and liquid sector with growth potential while being mispriced," said Vikas Gupta, CEO at OmniScience Capital. "The financial services sector is likely to remain the favourite of long-term investors, including FPIs."Gupta said the focus is on financial services and infrastructure, which have clear growth visibility in the near to medium term and are significantly undervalued.Apart from financials, FPIs remained net buyers in construction, consumer services, services, consumer durables, realty and healthcare, among others, with purchases ranging between ₹1,400 crore and ₹3,400 crore.On the other hand, they sold shares worth between ₹1,300 crore and ₹4,300 crore in the automobile and auto components, capital goods, oil, gas & consumable fuels, power, and metals & mining sectors. They continued to pull out of IT stocks, too, but the pace of the selling subsided in the second half of June.