Why are foreign investors pivoting from banks to Industrials, IT? CLSA details  $13.2 billion outflow in June quarter 

Domestic Mutual Funds took a different route, adding banks, energy, consumer staples and materials, even as they reduced exposure to information technology, utilities and telecom. The report also shows both investor groups reducing allocations to India’s biggest companies and increasing exposure to mid-cap and small-cap stocks, making portfolio positioning one of the key themes to watch in the months ahead.

Foreign Portfolio Investors move away from banks after 11 years

The most significant change in the June-quarter data comes from the banking sector.

CLSA said , “FPIs turned neutral on banks for the first time in our 11-year record and trimmed materials, telecom and energy to fund additions in industrials, discretionary ex-auto, IT and healthcare.”

Foreign Portfolio Investors reduced their relative weight in banks by 191 basis points, led by a 56-basis-point reduction in HDFC Bank, 40 basis points in Federal Bank and 27 basis points in ICICI Bank. Axis Bank, Kotak Mahindra Bank and State Bank of India also saw reductions of 10-14 basis points each. The report says this marked the first time in its 11-year record that overseas investors no longer held an overweight position in the banking sector.

Industrials, information technology and healthcare receive fresh allocations

Money withdrawn from banks and materials found its way into industrials, information technology and healthcare.

According to CLSA, “These funded a shift to ‘Overweight’ from ‘Neutral’ in industrials/discretionary ex-auto.” It also notes that “The relative weight in IT and healthcare touched record highs.”

Adani Ports and Lenskart Solutions each recorded an 18-basis-point increase in relative weight. Infosys gained 29 basis points, while Wipro added 11 basis points. Laurus Labs and Acutaas Chemicals recorded increases of 12 basis points and 10 basis points, respectively. Adani Green’s 20-basis-point increase resulted in a 50-basis-point rise in Foreign Portfolio Investors’ overweight position in utilities.

Domestic Mutual Funds increase exposure to banks, energy and consumer staples

Domestic Mutual Funds positioned their portfolios differently during the quarter.

The report stated that , “DMFs add energy, banks, staples and materials by trimming IT and utilities.”

Reliance Industries accounted for a 25-basis-point increase that lifted mutual fund exposure to energy by 36 basis points. ICICI Bank recorded a 22-basis-point increase, taking Domestic Mutual Funds’ overweight position in banks to a three-year high.

Consumer staples also attracted fresh allocations. Hindustan Unilever and Britannia recorded additions of 6 basis points and 5 basis points, respectively, reducing the sector’s underweight position by 19 basis points. Materials strengthened after additions of 3 basis points each in JSW Steel, Hindustan Zinc and APL Apollo Tubes.

Indian Markets: Sector positioning in June quarter

Source: CLSA Investor Positioning – June 2026.

Both investor groups reduce exposure to mega-cap companies

The report identifies one common theme across foreign and domestic institutions.

It says, “Both FPIs and DMFs fled mega-caps in near-lockstep, slashing their weight in top the 10 stocks by nearly 4 ppts and moving into midcaps and small caps.”

Foreign Portfolio Investors reduced their allocation to the top-100 companies by 330 basis points, including a 426-basis-point reduction in the top-10 stocks. Domestic Mutual Funds reduced exposure to the top-100 companies by 332 basis points, including a 377-basis-point reduction in the top-10 companies. Both groups increased allocations to mid-cap and small-cap stocks during the quarter.

ONGC, TCS, Bajaj Finance and HUL find support from both investor groups

Despite following different sector strategies, a few companies attracted buying from both Foreign Portfolio Investors and Domestic Mutual Funds.

CLSA says, “Among large caps, FPIs and DMFs increased their relative weights in ONGC, TCS, Bajaj Finance and HUL, while Axis Bank and Bharti Airtel saw broad-based selling.”

The report also notes that Foreign Institutional Investors increased exposure to Hindalco even as Domestic Institutional Investors reduced holdings. Domestic Institutional Investors, meanwhile, added HDFC Bank and ICICI Bank despite selling by Foreign Institutional Investors.

Stocks with notable portfolio changes

Source: CLSA Investor Positioning – June 2026.

Domestic ownership continues to offset part of foreign selling

Foreign Portfolio Investors sold $13.2 billion of Indian equities during the June quarter, reducing their ownership in the BSE 500 by 77 basis points quarter-on-quarter to 15.6%, the lowest level in 15 years.

Domestic Mutual Fund ownership increased 20 basis points to a record 12.2%. Insurance ownership declined 30 basis points, resulting in combined domestic institutional ownership falling 9 basis points, the first quarterly decline in three years. Retail investors were the only ownership category to increase their share during the quarter.

Conclusion

CLSA’s June-quarter positioning data suggested that  institutional portfolios entered the second half of 2026 with distinctly different sector preferences. Foreign Portfolio Investors increased allocations to industrials, information technology, healthcare and consumer discretionary companies outside automobiles while reducing exposure to banks, materials, telecom and energy. 

Meanwhile domestic mutual funds strengthened positions in banks, energy, consumer staples and materials. At the same time, both investor groups reduced allocations to mega-cap companies and increased exposure to midcap and small cap stocks, making those portfolio trends a key area to watch over the coming quarters.

Disclaimer: This report is based on institutional market data and sector positioning analysis for informational purposes only, and does not constitute investment advice or a recommendation to buy, sell, or hold any security. Readers are advised to evaluate market risks and consult a SEBI-registered financial advisor before making any investment decisions.

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