FPIs Buy ₹14,634 Crore Of Banking Stocks In June's Second Half; Worst Of Selling May Be Over

Foreign portfolio investors (FPIs) staged a notable comeback in Indian financial stocks in the second half of June, buying shares worth ₹14,634 crore after selling ₹11,263 crore in the first fortnight of the month.

This marks the highest fortnightly purchase in the financials sector in 14 months and the first net buying since the second half of February.

The broader turnaround helped overseas investors become net buyers of Indian equities worth over ₹14,000 crore between 16 June and 30 June, reversing net sales of ₹63,450 crore in the first half of the month.

What Drove The Shift

Several factors came together to pull foreign money back into Indian financials. Policy support played a central role. In June, the RBI extended a subsidised forex swap facility for banks' overseas borrowings and allowed lenders to extend loans to non-residents against foreign currency deposits.

The government separately scrapped capital gains tax for FPIs on government debt and removed the 20% tax on interest income from such investments, effective 1 April 2026.

Easing tensions in West Asia from mid-June also reduced the risk-off sentiment that had kept foreign investors away from Indian equities for months. Additionally, part of the inflow is attributed to FTSE index rebalancing during the June review period, alongside active value buying in a sector that had seen significant de-rating.

Financial Services Stocks In Focus

Financial services stocks, which make up nearly 40% of the Nifty index, have been the hardest hit by foreign outflows over the past year precisely because of their weight in the index. Their recovery led the broader market, with the Nifty Bank index gaining 6.1% in June against the Nifty 50's 1.4% rise.

HDFC Bank was a standout, rising 7.2% after a legal review found no contemporaneous evidence supporting concerns raised around former chairman Atanu Chakraborty's resignation. The bank also appointed former Finance Secretary Rajiv Kumar as part-time chairman for a three-year term.

According to analysts, the financial services sector remains significantly undervalued relative to its growth potential and is likely to stay a preferred destination for long-term foreign investors.

Construction, consumer services, realty and healthcare also saw buying, while automobiles, capital goods, oil and gas, power and metals saw continued selling. Information technology (IT) outflows persisted but at a slower pace in the second half of the month.

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