FPIs Bet On Autos In August Second Half Amid GST Cut Optimism, Reduce Holdings In Financials, IT

In August 2025, foreign portfolio investors (FPIs) increased their bet on the automotive sector, and trimmed their holdings in the financial services and IT sectors. According to fortnightly FPI sectoral activity data for the second half of August from the National Securities Depository (NSDL), FPIs bought auto shares worth Rs 2,617 crore, the highest among all sectors during the last 15 days of the month. Following the automotive sector, FPIs bought shares in the services sector worth Rs 1,967 crore, and in the chemicals sector worth Rs 1,161 crore.

Besides auto stocks, FPIs also bought shares in other sectors during the second half of August 2025. They invested Rs 785 crore in construction materials, Rs 764 crore in capital goods, Rs 678 crore in healthcare, Rs 490 crore in consumer services, Rs 179 crore in media and entertainment, and Rs 53 crore in FMCG.

In the fortnight prior, the telecom sector attracted the highest FPI inflows, about Rs 7,446 crore. In the auto sector, they were net sellers of shares worth Rs 814 crore.

FPIs Shift Gears Towards Auto Amid GST Rate Cut Optimism

FPI inflows into the auto sector increased after Prime Minister Narendra Modi’s Independence Day address, during which he announced that the Goods and Services Tax (GST) Council will be making major reforms in the GST rates, raising expectations of rate cuts across several industries.

On September 4, the GST Council, chaired by Union Minister of Finance Nirmala Sitharaman, announced the reforms, reducing the existing four-tier structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent, to two-tier structure of just 5 per cent and 18 per cent.

Under the new regime, which will come into effect from September 22, GST rates on entry-level motorbikes and small cars will fall from 28 per cent to 18 per cent. This is expected to boost consumer demand and improve profit margins for automobile manufacturers.

Financials, IT See Highest FPI Inflows

The financial services sector saw the highest FPI outflows during the latter half of the month, about Rs 9,817 crore. Following it, FPIs sold shares worth Rs 4,905 crore in the IT sector, and Rs 2,017 crore in the oil and gas sector. The power sector witnessed net outflows of Rs 1,708 crore, the telecom sector saw Rs 1,680 crore, and the metals and mining sector saw outflows of Rs 1,266 crore. Consumer durables, textile, realty and construction sectors also saw net outflows.

Ongoing FPI Selling

FPIs have been selling Indian shares incessantly over the past few months. In August this year, FPIs sold a total Rs 34,993 crore worth of shares, following Rs 17,741 crore in July. In September so far, till September 5, FPIs have offloaded Rs 12,257 crore, according to NSDL data.

“The simple explanation for this massive selling by the FPIs is the relatively high valuations in India compared to valuations in other markets. FPIs are moving money to cheaper markets,” said VK Vijayakumar, chief investment strategist, Geojit Investments in a note.