FPIs still in exit mode, dump record chunk of financial services

Foreign portfolio investors cut exposure to financial services in the first half of March, pulling out ₹31,831 crore, the highest-ever fortnightly selling in the sector, NSDL data show. The outflow comprised 60% of overseas investors' outflows of ₹59,382 crore across 16 sectors in the period, marked by a risk-off mood amid the West Asia conflict. The overall selling this fortnight is the highest since the second half of October 2024, when foreigners sold to the tune of ₹71,500 crore.

"BFSI acts as a proxy for the broader economy, and inflationary concerns triggered a panic sell-off by foreign investors," said Pankaj Pandey, head of retail research at ICICI Securities. "While financials saw heavy withdrawals, selling in other sectors was comparatively muted."

The Bank Nifty has fallen 12.7% over the past month, while the Nifty has declined 9.6% during the same period.

"BFSI is a sector where foreign ownership is relatively high and hence in most periods of foreign selling, the sector has under performed," said Sriram Velayudhan, senior vice president, IIFL Capital Services.

Among other sectors, FPIs pulled out ₹4,807 crore from automobiles, ₹3,856 crore from telecom, and ₹2,975 crore from construction in the first 15 days of March.

"Autos are relatively more vulnerable given their sensitivity to input costs and demand cycles, while telecom remains more defensive in nature," said Riddhiman Jain, managing director and head - investment strategy and solutions at Waterfield Advisors. The current trend, he said, is driven more by a broad risk-off sentiment than sector-specific overvaluation.