After three months of persistent outflows, foreign institutional investors (FIIs) made a strong comeback to Indian equities in October 2025, turning net buyers to the tune of ₹11,050 crore ($1.3 billion). The return of foreign capital coincided with a 4.5% rally in the Indian equity benchmarks Sensex and Nifty during the month, following a subdued 0.8% gain in September. Domestic institutional investors (DIIs) also supported the rally, investing a robust $6 billion through the month, according to a latest report by JM Financial.

FIIs were net buyers for most of October, barring a few sessions toward the end of the month when some profit-taking was evident, the report showed. The data, however, shows a distinct shift in sectoral preferences — from defensives and consumer plays to cyclical and rate-sensitive sectors.

Heavy buying seen in BFSI, O&G, metals, and power

As per the report, the BFSI sector emerged as the top draw, attracting $1.5 billion in net inflows, reflecting investors’ continued confidence in India’s banking and financial ecosystem.

The sector’s strong earnings trajectory, improving asset quality, and resilient credit growth have made it a structural favorite among global funds. The sector’s share in total FII assets under custody (AUC) climbed to 31.7% in October, up from 31.2% a month earlier, cementing its dominant position.

The oil & gas (O&G) space followed with inflows of $1.03 billion, a sharp turnaround from being net sold in September. The reversal was driven by expectations of healthy refining margins, improving profitability in upstream businesses, and government clarity on fuel pricing policies. The metals sector also drew $355 million, aided by stable commodity prices and China’s stimulus-linked demand optimism.

Among other gainers, telecom attracted $243 million, backed by improving ARPU trends and 5G monetisation prospects, while automobiles and power brought in $110 million and $109 million, respectively — reflecting growing confidence in India’s consumption recovery and energy transition story. Notably, O&G, telecom, and power were all sectors where FIIs turned buyers in October after being net sellers in September.

Outflows concentrated in defensives

On the other hand, FIIs pared exposure in defensives and high-valuation pockets. The FMCG sector saw the steepest outflows of $482 million, suggesting global investors were booking profits amid moderating volume growth and sticky valuations. Services followed with $391 million in outflows, while pharma and IT saw $351 million and $248 million in selling, respectively. The durables segment registered $198 million in outflows, likely due to margin pressures from raw material volatility, while chemicals witnessed $105 million in withdrawals amid pricing headwinds in specialty chemicals.

Sectorally, FIIs also turned net sellers in capital goods and media, reversing their September buying stance — a sign that investors may be rotating toward sectors offering near-term earnings visibility and global linkages.

Top holdings remain stable

Despite the churn, FIIs’ top five sectoral holdings — BFSI, auto, IT, oil & gas, and pharma — remained unchanged and together accounted for nearly 60% of FII equity assets in India. Within this group, BFSI and IT saw sequential increases in allocation, while auto and O&G slightly declined. Pharma remained stable.

As a share of total FII assets under custody (AUC), the sectoral mix saw only marginal shifts in October. The BFSI segment strengthened its dominance, rising to 31.7% from 31.2% in September, with FIIs continuing to be strong buyers. The auto sector, while slipping slightly to 7.7% from 8%, remained the second-largest holding. IT services edged up to 7% from 6.9%, even as FIIs turned net sellers during the month. The oil and gas (O&G) segment dipped marginally to 6.9% from 7%, despite attracting fresh inflows in October. Meanwhile, pharma held steady at 6.7%, though FIIs pared some positions within the space.

Ownership Snapshot

At the end of October 2025, FIIs’ overall shareholding in Indian equities stood at 15.4%, marginally below 15.6% in September. However, the total equity assets under custody (AUC) rose 2.7% month-on-month to ₹72.7 lakh crore, up from ₹70.8 lakh crore in September, supported by higher market capitalization and price appreciation.

The shift in sectoral flows underscores a clear investor narrative — global funds are selectively re-entering Indian markets, favouring financials, energy, and industrial-linked sectors with stronger earnings visibility, while trimming exposure to defensives amid elevated valuations.

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