Why FPIs Favoured Consumer Services While Pulling Money Out Of Banks In September

Foreign portfolio investors (FPIs) ramped up selling in the second half of September 2026, with selling picking up sharply towards the end of the month.  Data from the National Securities Depository (NSDL) shows that FPIs sold Rs 29,992 crore through stock exchanges between September 16 and 30 nearly double the Rs 15,545 crore sold in the first half of the month. This took their total secondary-market selling in September to Rs 45,537 crore.

The selling was concentrated in the final days of the month. Nearly two-thirds of the second-half outflow came in the last three trading sessions, including Rs 10,743 crore on September 30 alone. FPIs, however, continued to invest in the primary market even as they sold heavily through the exchanges. They put around Rs 9,676 crore into new issues in September, including Rs 8,248 crore in the second half. Of this, Rs 5,515 crore came on September 24 alone.

After including primary-market investments, the net equity outflow of FPIs stood at Rs 35,861 crore in September. The outflow was Rs 14,116 crore in the first half and rose to Rs 21,745 crore in the second half.

The rupee also weakened during the month, falling from around Rs 95.45 to Rs 96.03 against the dollar. Foreign investors sold about Rs 20,700 crore of debt during the month.

Global conditions also became less favourable for emerging markets. Brent crude stayed in the $100-110 a barrel range for much of September, while the US 10-year Treasury yield kept moving higher and has now crossed 5.35 per cent. The rupee has weakened further and was trading above Rs 97 to the dollar on October 8. Expectations of another US Federal Reserve rate hike have added to the pressure on riskier assets.

For foreign investors, a weaker rupee cuts the value of their returns in dollar terms. Higher US Treasury yields also make emerging-market assets less attractive.

The selling was reflected in the broader market. The Nifty was down by 6 per cent for September.

Financials, Oil & Gas And Auto See Heavy FPI Selling

Financials saw the highest FPI selling in the second half of September. Foreign investors sold Rs 6,943 crore worth of financial stocks during the period.

Banks and non-banking financial companies (NBFCs) account for a large share of foreign ownership in Indian equities. That also makes financial stocks a relatively easy place for global funds to cut exposure when they want to reduce their India holdings. The sector had already seen heavy selling through 2026.

A weaker rupee, higher bond yields and expectations of another Fed rate hike have added to the pressure on rate-sensitive financial stocks.

FPI selling also increased in oil and gas stocks in the second half. Higher crude prices can hurt oil marketing companies when retail fuel prices do not rise in line with their input costs. Selling in the sector doubled in the second half, as Brent stayed above $100 for much of the period.

Auto stocks also saw FPI selling, even though the sector was not showing signs of a major slowdown in domestic demand.

Sales data released on October 1 showed Maruti Suzuki's total sales rising 24.40 per cent year-on-year (y-o-y), while Mahindra & Mahindra reported 15 per cent growth. This suggests that the selling was more likely due to broader market and macro concerns than weak domestic demand. Rising raw material costs and weak exports to Southeast Asia were other concerns, with Chinese automakers putting pressure on prices in the region.

Telecom also saw a rise in FPI selling, with outflows increasing to Rs 2,423 crore in the second half from Rs 991 crore in the first half.

The upcoming Jio Platforms' initial public offering (IPO) could be one factor. The Mukesh Ambani-owned company plans to launch its Rs 37,700 crore IPO on October 21, with a listing expected on October 28, according to Reuters. The upcoming IPO may also be prompting some investors to sell existing holdings and keep cash ready for the issue. Bharti Airtel, Jio’s closest listed rival, could be one of the stocks where foreign investors raise money for the IPO.

FPIs also sold Rs 2,322 crore of metals and mining stocks, Rs 1,508 crore of consumer durables and Rs 1,353 crore of capital goods in the second half. FMCG was among the few sectors where selling eased. FPI outflows from the sector fell to Rs 972 crore in the second half from Rs 2,029 crore in the first half.

Consumer Services And Services Attract More FPI Money

While foreign investors cut exposure to several cyclical sectors, they increased buying in consumer-facing and services businesses. Consumer services attracted Rs 1,911 crore of FPI money in the second half, as against Rs 422 crore in the first half. Services also saw buying rise to Rs 1,397 crore from Rs 905 crore.

Foreign investors were reducing exposure to financials, oil and gas, autos and capital goods, where global rates, crude prices, currency movements and external demand can have a greater impact. At the same time, they were increasing exposure to consumer services and other services, which are more closely linked to domestic demand.

What Could Bring FPI Flows Back

Crude oil prices and US Treasury yields are likely to remain key factors for FPI flows in the coming weeks. If both stay high, Indian stocks could remain under pressure, especially sectors that are sensitive to interest rates, input costs and global demand. The rupee is another concern. A weaker rupee reduces foreign investors’ returns when they convert their investments back into dollars.

However, FPIs have continued to put money into new issues despite selling in the secondary market.

The Jio Platforms IPO later in October 2026 will be another test of whether foreign investors are willing to bring fresh money into Indian equities.