Foreign portfolio investors (FPIs), who have been net sellers to the tune of Rs 1.65 lakh crore in 2025, have shown some interest in beaten down sectors in December.
Market experts said that it is primarily because there is some rising valuation comfort in some pockets, including information technology and consumer durables while the telecom sector continues to attract inflows.
For example, though the highest net FPI outflow of almost ₹75,000 crore was reported in IT in 2025, they net bought more than ₹1,100 crore-worth of IT stocks in December. In fact, IT is among the few sectors that saw FPI inflows in December and for the first time since June 2025, according to data from NSDL.
In fact, December was just the third month in the entire year that FPIs were net buyers in the sector.
Market experts said that investors are betting on better order wins and no further deterioration in demand, leading to renewed interest towards the sector.
Consumer Durables Interest
Similar is the case with consumer durables in which they made net purchases Rs 599 crore for the first time in the entire year.
The renewed interest was driven by domestic fundamentals rather than global cues. Select consumer durables stocks are at very attractive valuation and there is a possibility for consumption revival after the recent direct and indirect tax cuts, said George Thomas, fund manager at Quantum Asset Management Company.
Some of them were impacted by a shorter summer last year which may now reverse, he added.
Meanwhile, their bullish bets on telecom stocks almost doubled on year to over ₹48,000 crore, marking the highest inflows seen by a sector during the year.
In financial services, FPIs remain constructive on well-capitalised banks and lenders with strong asset quality because credit growth remains healthy and balance sheets are resilient. “…flows are disciplined, given global investors’ sensitivity to currency movement and global risk sentiment,” said Anil Rego, founder and fund manager at Right Horizons PMS.
Overall, GST cuts are supportive, but earnings momentum, balance sheet strength, and valuation comfort remain the decisive factors, he said.
However, the rally in consumer-heavy spaces such as fast-moving consumer goods (FMCG) and automobiles have now lost steam as investors now await a pickup in earnings growth, market experts said. FPIs have net sellers of ₹37,000 crore in the FMCG sector.
Global Trade Policy Risks
Overall, what could keep foreign investors away from the domestic market is any further deterioration in US trade and tariff policies. “Europe is as big a market as the US is. If we are able to pull through the EU deal, then the competitive pressures will be on Trump to sign a deal with India,” said Vinit Bolinjkar, head of research at Ventura Securities.
He also expects the US-India deal to be signed between March and June.
Going forward, if foreign investors make a big comeback to the market, their favourite sector would be large banks which are fairly valued, said V K Vijaykumar, investment strategist at Geojit Financial Services, adding that high uncertainty makes it difficult to predict the likely sectors they would invest in.
Among major triggers for foreign players will be the Union Budget due on February 1. “A demand of FIIs to remove the anomalies in double taxation of capital gains may be addressed,” added Vijaykumar.
However, no other major reforms are said to be in the cards for equity investors during the Budget. “Changes in market-related taxation like short-term capital gains, long term capital gains, dividend taxation and STT are unlikely,” Vijaykumar added.