FPIs Turn Bullish On IT, Consumer Services, Metals In 2025's Last Fortnight, Dump FMCG, Financials, Auto

FPI Sectoral Activity: Foreign portfolio investors (FPIs) turned bullish on information technology (IT), consumer services and metals and mining sectors toward the end of December. During this sectoral churn, FPIs also trimmed their holdings in financial services, FMCG and automobile stocks, fortnightly data from National Securities Depository Limited (NSDL) showed.

Between December 16 and December 31, FPIs bought IT stocks worth Rs 4,457 crore, while consumer services and metals and mining attracted inflows of Rs 3,390 crore and Rs 2,177 crore, respectively. At the same time, they reduced exposure to FMCG stocks worth Rs 4,425 crore, sold financial services shares worth Rs 4,009 crore and offloaded auto stocks worth Rs 2,656 crore.

This was a clear reversal from the trend seen in the first half of the month. Between December 1 and December 15, FPIs were net sellers in IT, offloading Rs 3,331 crore, and marginally trimming consumer services by Rs 50 crore, even as they bought Rs 807 crore worth of metals and mining stocks. During that period, they also sold FMCG stocks worth Rs 1,419 crore and financial services shares worth Rs 6,516 crore, and added Rs 611 crore to auto stocks.

For the full calendar year 2025, FPIs remained net sellers in Indian equities, offloading shares worth Rs 1,66,286 crore. The selling has continued into the new year as well, with foreign investors pulling out Rs 6,224 crore from equities so far in 2026, till January 6.

FPIs Return to IT After Months of Selling

The IT sector was the biggest gainer from the late-December rotation, as FPIs returned after months of heavy selling. Analysts said sharp corrections had made valuations more attractive, and the optimism around a recovery in global technology spending also contributed to improving the sentiment.

“IT saw inflows as valuations corrected over the past year. Also, there are expectations that global tech spending is coming and deal pipelines may stabilise in FY26,” said Ravi Singh, chief research officer at Master Capital Services.

According to Pranay Aggarwal, director and CEO of Stoxkart, multiple macro factors came together to improve the sector’s outlook. “Strong buying in IT was led by attractive valuations, rupee depreciation, and optimism around AI-led growth and heightened expectations of US interest rate cuts, which improved the outlook for discretionary technology spending and earnings visibility.”

Manasvi Garg, Sebi-registered investment advisor and founder and CEO of Moneyvesta, said FPIs were selectively re-entering IT stocks after the sector slipped into oversold territory. “IT buying was driven by a combination of technical, regulatory and macro tailwinds. First, the sector had entered deeply oversold territory after sharp corrections triggered by regulatory concerns around US visa policy.”

He added that those concerns began to ease by mid-December. “By mid-December, markets began to reprice this risk as large Indian IT companies demonstrated effective mitigation through higher offshoring, increased local hiring in the US, and pricing adjustments keeping margins largely stable.”

Easing global monetary conditions also played a role. “The US Federal Reserve’s December rate cut reinforced expectations of easier monetary policy, which typically revives enterprise spending on AI, cloud, and cybersecurity,” Garg said.

The US Federal Reserve’s Federal Open Market Committee (FOMC) at its December 9-10 meeting reduced the key interest rate by 25 basis points to the range of 3.50 per cent to 3.75 per cent, the third consecutive rate cut in 2025. The Chicago Mercantile Exchange's (CME) FedWatch Tool shows that traders think there's an 83.90 per cent probability of the FOMC keeping rates unchanged at its upcoming meeting this month, while 16.10 per cent probability of rates getting reduced by 25 bps to a 3.25-3.50 per cent range. For the March meeting, the 25 bps rate cut probability increases to 41.40 per cent, and a 6 per cent chance for a bigger 50 bps cut.

FPIs Bet on Consumer Services as Discretionary Spend Picks Up

Consumer services stocks continued to attract FPI inflows as early signs of a recovery in discretionary spending, particularly in urban markets, lifted investor sentiment. Analysts said the sector currently offers clearer growth visibility than consumer staples.

“Consumer services, which offer better volume and earnings momentum than staples, benefited from optimism about domestic discretionary demand recovery, which is supported by urban consumption, travel and digital services growth,” Singh said.

Aggarwal highlighted that softer inflation and policy measures helped revive spending. “Consumer services benefited from a rebound in demand supported by softer inflation and Goods and Services Tax (GST) cuts, with consumers favouring experiences like travel and dining, alongside resilient export demand.”

India’s consumer price index (CPI)-based inflation stayed well below the RBI’s 4 per cent target for most of the year. CPI inflation fell to a decade-low of 0.25 per cent in October 2025, led largely by deflation in food prices and the impact of GST rate cuts. Inflation rose marginally in November to around 0.7 per cent as food prices firmed across categories.

Garg said FPIs are also positioning for longer-term structural shifts within the sector. “Consumer services attracted strong FPI inflows on the back of sustained strength in domestic consumption and the emergence of structural growth themes.”

He pointed to the rapid evolution of quick commerce as one such theme. “What began as a convenience-led channel has evolved into a scalable, full-stack consumer marketplace with deep urban penetration and improving unit economics.”

Metals See Buying on Infrastructure and Global Demand Cues

Metals and mining stocks saw FPI buying on hopes of a cyclical pickup in global industrial demand and continued strength in domestic infrastructure spending.

“Metals and mining saw FPI inflows on expectations of a global cyclical revival, sustained commodity prices and India’s infrastructure and capex push improving earnings visibility,” Singh said.

Aggarwal added that global cues also supported the sector. “Metals and mining gained from government push for critical minerals, strong domestic import growth reflecting robust demand, favourable global commodity prices, and hopes of Chinese economic recovery.”

Garg said metals also provided a tactical hedge for foreign investors amid India-specific risks such as rupee depreciation and elevated equity valuations, which allowed foreign investors to retain exposure to India and also align portfolios with global commodity and capex cycles.

FMCG Sees Heavy Selling on Valuations

On the other hand, FMCG stocks bore the brunt of FPI selling, largely due to stretched valuations and muted volume growth.

According to Singh, FMCG saw selling because of weak volume growth, distress from rural demand, and elevated valuations that limit upside. Aggarwal echoed similar concerns and said that FPIs sold FMCG due to stretched valuations and weak volume growth.

According to Garg, the selling reflected profit booking rather than a sharp deterioration in fundamentals. “FMCG witnessed the sharpest FPI outflows, largely because of valuation-led profit booking rather than a deterioration in demand fundamentals.”

Year-end Portfolio Rejig Hits Banks and Autos

Financial services stocks also saw sustained outflows as FPIs trimmed exposure after a strong run. “Financial services saw outflows because of concerns over margin normalisation and peak profitability that led FPIs to reduce their exposure after strong past performance,” Singh said.

Aggarwal attributed the selling in the sector to profit booking, regulatory overhang and margin concerns.

Autos, too, saw sales in the latter half of December. “Auto stocks faced selling largely due to profit-booking as valuations remained relatively full,” Singh said.

Garg said the selling was led more by positioning than fundamentals. “The auto sector saw a sharp reversal in FPI flows despite strong underlying demand. The selling was led more by portfolio positioning than by near-term fundamentals.”