Foreign investors continued to exit Indian equities in February, but the pace of selling in heavyweight financial stocks slowed sharply from January’s heavy outflows, data on Thursday showed, even as concerns over lagging economic growth persist.
According to data from the National Securities Depository, foreign portfolio investors (FPI) sold financials worth ₹6,991 crore ($803.2 million) last month, which was the most among major sectors. However, this marks a significant moderation from January when financials saw outflows of $3 billion.
In addition to financial stocks, foreign investors also offloaded $800 million worth of consumer stocks, while the auto and capital goods sectors saw outflows of $450 million and $500 million, respectively.
Overall, FPIs sold about $4 billion of Indian shares in February, a decrease from the $9 billion recorded in January – which was the second-highest monthly foreign sales on record.
The consumer and auto indexes experienced a 10.6% and 10.4% decline in February, while financials lost 0.8%.
Since the beginning of the year, FPIs have offloaded domestic stocks worth $15.34 billion, with total sales amounting to $27 billion since the end of September when equity markets reached record highs.
A combination of slowing domestic corporate earnings, concerns over moderating economic growth, and the potential impact of higher U.S. interest rates due to tariffs have contributed to the foreign retreat.
The Nifty 50 has plummeted 15% from its record high, including a 6% drop in February, marking its longest monthly losing streak since 1996.
Analysts at Citi Research emphasized that the India positioning of emerging markets (EM) funds is currently the most underweight in 20 years, with many investors unsure about when to increase their exposure to India. They believe that any signs of stability or improvement in earnings could serve as catalysts to reverse FPI outflows.
While liquidity easing by the central bank and more attractive corporate valuations may lead to a short-term market rebound, global uncertainties continue to pose a risk, according to Jefferies analysts.
