This is a Mint Premium article gifted to you.Subscribe to enjoy similar stories.
MUMBAI: Foreign portfolio investors (FPIs) pulled out a record ₹1.8 trillion from Indian equities in FY26, according to data Centre for Monitoring Indian Economy (CMIE), but the headline outflow masks a more targeted shift. Rather than a broad exit, investors pared exposure to IT, defensives and parts of consumption, while selectively adding to sectors tied to India’s capital expenditure cycle.
A Mint analysis of sectoral flows shows that even as overall selling remained elevated, capital moved towards capital goods, telecom, and metals, signalling a narrower, conviction-led allocation rather than a wholesale retreat from the market. The shift reflects diverging earnings visibility between export-facing sectors and domestic investment plays.
Information technology (IT) stocks bore the brunt in FY26, with outflows of ₹80,628 crore, the steepest among sectors, CMIE data showed. The trend caps a volatile few years: after outflows of ₹51,138 crore in FY23, the sector saw inflows of ₹5,931 crore in FY24, before slipping back to outflows of ₹4,226 crore in FY25 and then accelerating sharply in FY26 amid weak global demand and concerns around artificial intelligence (AI)-led disruption.
Defensive segments also remained under pressure. Fast-moving consumer goods (FMCG) saw outflows of ₹30,712 crore, following ₹37,235 crore in FY25 and reversing inflows of ₹17,180 crore in FY23. Financial services, long a core FPI holding, recorded outflows of ₹29,242 crore, extending the weakness from FY25, when the sector had seen an exit of ₹39,421 crore.
“This is not panic selling but a portfolio shift,” said Sachin Jasuja, head of equities and founding partner at Centricity WealthTech. “IT outflows reflect weak demand and AI-led disruption, and FPIs may return only when earnings improve. Financials face near-term margin pressure, but the outlook remains cyclical. Overall, flows are moving towards domestic capex themes rather than away from India.”
Healthcare, which had attracted steady inflows in the previous two years, also turned negative with outflows of ₹28,149 crore in FY26, indicating profit booking.
Selling was not limited to export-oriented or defensive sectors. Among domestic segments, consumer durables ( ₹17,294 crore), power ( ₹15,757 crore) and real estate ( ₹15,083 crore) also saw FPIs turn sellers, pointing to a selective, rather than broad-based, repositioning.
“The sharp reallocation by FPIs away from IT, FMCG and financials towards capital goods, telecom and metals reflects that India’s growth momentum and capex cycle is playing out,” said Ravi Singh, chief research officer at Master Capital Services.
Against this backdrop, flows into investment-cycle plays stood out.
Capital goods attracted ₹26,672 crore worth of foreign inflows in FY26, up from ₹10,631 crore in FY25, extending a multi-year trend that included inflows of ₹17,419 crore in FY23 and ₹45,685 crore in FY24.
Telecommunication drew ₹26,493 crore, compared with ₹28,273 crore in FY25, building on a steady rise from ₹1,175 crore in FY23 and ₹15,277 crore in FY24.
Metals and mining saw inflows of ₹24,346 crore, a sharp turnaround from outflows of ₹1,223 crore in FY25. Oil, gas and consumable fuels also reversed course, attracting ₹18,308 crore after recording outflows in each year since FY23.
“Capital goods and metals, in particular, are being favoured as the multi-year investment cycle gains traction, supported by sustained policy push,” Singh said. “Infrastructure ordering pipelines are expanding, and the broader manufacturing push is beginning to reflect in corporate order books.”
offers a compelling domestic story, Singh added, with industry consolidation leading to a duopoly structure, improving pricing power and stronger monetization prospects.
“As capital follows, opportunity and allocation in the market tilts toward wherever fundamentals are strengthening with valuations having better risk to reward. Further a broader based capital rotation signals consensus on where the market is seeing strong opportunity,” Sigh added.
“For markets, this shift implies that sectoral divergence may continue, with domestic-facing and capex-driven plays likely to remain in focus, even as export-oriented and defensive sectors await clearer signs of recovery.,” said Jasuja.
Mayur Bhalerao is a markets reporter at Mint with around 12 years of experience across finance and media. His coverage focuses on Indian equities, IPOs and broader market trends, tracking developments across large-cap, mid-cap and small-cap stocks as well as shifts in investor behaviour among retail investors, mutual funds and foreign portfolio investors.<br><br>Mayur’s reporting emphasises data-driven analysis of market movements, valuations and sectoral trends. He uses shareholding disclosures, financial filings and market data to explain developments on Dalal Street and examine how global events and domestic policy changes—including geopolitical tensions, crude oil prices and regulatory decisions—shape Indian equities and investor sentiment.<br><br>He regularly uses financial databases such as the Bloomberg terminal and Capitaline to produce data-intensive stories, analysing company disclosures, ownership patterns and sectoral trends across both Indian and global markets. He also supports colleagues in the newsroom by providing database-driven insights and market data analysis that help strengthen broader market coverage.<br><br>Before joining Mint, Mayur worked at Informist Media Pvt Ltd., a leading financial newswire, where he developed his expertise in financial journalism in a specialised markets newsroom.