FIIs sell consumer stocks despite GST2.0 boost to buy financials worth Rs 13,300 crore in October

Foreign institutional investors (FIIs) offloaded consumer-oriented stocks worth Rs 9,477 crore in October, while pouring Rs 13,279 crore into the financial space, data from ACE Equity showed. Interestingly, the selling off of consumer stocks took place despite the rollout of GST 2.0, a tax reform aimed at boosting consumption. While holiday retail sales rose 8.5%, experts warned that pent-up demand and sluggish income growth could dampen the outlook.Among consumer segments, FMCG witnessed the sharpest sell-off at Rs 4,259 crore, followed by consumer services at Rs 3,462 crore and consumer durables, including home appliances, at Rs 1,756 crore. Other sectors that saw notable sales included healthcare, information technology and building materials, with total outflows of nearly Rs 6,600 crore.

On the other hand, financial services emerged as the top choice for foreign investors, who bought shares worth Rs 13,279 crore. The oil and gas sector followed with inflows of over Rs 9,000 crore, while the metals, construction and telecom sectors also attracted purchases worth Rs 3,147 crore, Rs 2,233 crore and Rs 2,160 crore respectively, ACE Equity data showed.

Some of the renewed interest in the financial sector can be attributed to the Reserve Bank of India’s more lenient stance on foreign ownership in banks. However, the broader conclusion points to a structural revival of global interest in the Indian banking sector. In the short term, the purchase also follows a phase of underperformance: concerns over slippages and rising credit costs in the unsecured lending and microcredit segments had led to a sharp downgrade of bank stock ratings in the last quarter of FY25. However, the correction has now created more attractive entry valuations, attracting investors back to the market.

The auto sector also witnessed a modest FII inflow of Rs 967 crore in October despite being one of the biggest beneficiaries of the GST 2.0 cut. Shares of key players like Maruti Suzuki and Eicher Motors rose nearly 30% in a month, reflecting the strong momentum of the sector.

Overall, October saw net inflows of nearly Rs 15,000 crore – a sharp reversal from the steep correction in September 2024, which marked one of the strongest monthly buying streaks this year. According to Elara Capital, FII ownership in Indian equities remains below historical average, with positions in the Nifty 50 falling from around 28% in December 2020 to around 25% in June 2025. FII ownership in the Nifty 500 has fallen from around 23% to 20% over the same period. Interestingly, mid-cap equity ownership has proven more resilient, fluctuating within a relatively narrow range of 13.5-16.3% over the past five years. However, recent data suggests early signs of stabilization and a possible bottom in mid-cap investing, in contrast to the continued decline in large-cap holdings. With improving earnings visibility and attractive valuations, Elara believes midcaps are increasingly better positioned to see renewed interest in FII.

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