FIIs pump ₹23,778 crore into Indian equities in May as BFSI, telecom shine; IT, auto see sharp outflows

Foreign institutional investors (FIIs) continued to bet on Indian equities, injecting ₹23,778 crore into Indian equities so far in May, while the benchmark indices, the BSE Sensex and the NSE Nifty, rallied nearly 3% during this period. These fund inflows come even after a major sell-off on May 9 in the backdrop of escalated tensions between India and Pakistan in the aftermath of the deadly terrorist attack in J&K’s Pahalgam and India’s strong retaliation in the form of ‘Operation Sindoor’. 

Data from stock exchanges revealed that FIIs emerged as net buyers in 9 out of 11 sessions so far in May, barring May 9 and May 13. After being net buyers for 16 consecutive sessions, FIIs turned net sellers on May 9, selling Indian equities worth ₹3,799 crore amid geopolitical concerns, followed by marginal withdrawal of stocks worth ₹477 crore on May 13.

This marks the third consecutive month in which FIIs have been net buyers, after investing ₹4,243 crore in April, following ₹2,014 crore in March. Despite recent fund inflows, FIIs remain net sellers for 2025 to the tune of ₹89,240 crore as they pulled out ₹46,599.08 crore in February and ₹72,677.21 crore in January.

"FIIs who were sellers in the first three months of 2025 having sold equity for ₹1,16,574 crore during this period turned buyers in April with a buy figure of ₹4,243 crore. This change in FII strategy from selling to buying accelerated in May with big buying of ₹23,778 crore through May 16,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Vijayakumar said that as the global trade scenario improves after the pause in trade tensions between the U.S. and China and the end of the India-Pak conflict, the investment scenario has also improved. The growth prospects in the U.S., China, Japan and the EU continue to be challenging while India is expected to clock a growth rate above 6% in FY26. Importantly, with inflation in India very much under control and the MPC expected to cut rates twice or thrice more in this rate cutting cycle, the macro construct in India looks good, he said.

“Going forward, FIIs are likely to continue their buying in India. Therefore, large caps will be resilient," he added.

DIIs infuse ₹2.4 lakh crore in CY25  

Meanwhile, domestic institutional investors (DIIs) extended their support to domestic bourses with net investments of ₹23,299 crore till date in May. Overall, DIIs have infused around ₹2.4 lakh crore in Indian equities in CY25 as they remained net buyers in all five months so far this year. They have been consistently pouring in funds in the equities market since July 2023.

BFSI, Telecom sectors lead inflows; IT, Auto buck the trend

Banking, Financial Services, and Insurance (BFSI) is the new darling of FIIs as the sector attracted substantial inflows of ₹31,104 crore in the past two months. This is followed by telecom, which has witnessed consistent inflows for the past five months, garnering nearly ₹16,235 crore. Among others, the chemicals sector has seen steady buying interest from FIIs, with inflows of ₹4,606 crore in the past eight months, as per SBI Securities data.

The substantial inflows in the financial services sector are on the back of two rate cuts initiated by the RBI, coupled with liquidity infusion, thereby ensuring that credit growth will remain healthy during FY26 and FY27, said Sunny Agrawal, DVP & Head of Fundamental Research at SBI Securities.

The consistent inflows in the telecom space also show strong investor confidence in the sector's growth potential, driven by the recent increase in tariffs, increasing digital adoption, and the ongoing 5G roll-out.

On the chemicals sector, Agrawal said that the quantum of investment in this segment is lower compared to financial services and telecom, but sustained interest suggests a positive long-term outlook for the Indian chemicals industry, potentially benefitting from global supply chain shifts and domestic demand.

On the flip side, sectors that saw the highest outflows included information technology (IT) and auto.  Over the past two months (March and April 2025), FIIs have offloaded equities worth around ₹23,600 crore in the IT space. This was attributed to subdued performance in the March quarter and a cautious outlook for the ongoing fiscal amid tariff tensions. IT companies have flagged an expected slowdown in clients' discretionary spending and broader economic uncertainty.

For the auto sector, the total FII outflows over the nine months leading up to April was around ₹42,600 crore. Foreign investors turned bearish on the auto sector due to muted performance in the passenger vehicles segment and caution about the urban demand outlook.