Sept 4 (Reuters) – Foreign portfolio investors (FPIs) sold 232.9 billion rupees ($2.7 billion) of Indian financial stocks in August, the highest monthly outflow in seven months, data from National Securities Depository showed on Thursday.
The sell-off was triggered by weaker lender margins following steep policy rate cuts in the June quarter and rising stress in consumer loans, credit cards, and microfinance.
Overall, FPIs pulled $4 billion from equities in August, also a seven-month high.
Concerns over India’s export competitiveness after steep U.S. tariffs, muted June-quarter earnings, cheaper valuations elsewhere, and a tactical shift to other Asian markets with tariff advantages further weighed on FPI flows, said Ajit Banerjee, president and chief investment officer at Shriram Life Insurance.
The financial services index fell 4.1% during the month, dragging the benchmark Nifty 50 down 1.4%.
FPIs offloaded 112.9 billion rupees in IT and 61 billion rupees in oil and gas stocks. In contrast, telecoms had foreign buying on improved earnings visibility after mobile tariff hikes, while construction, autos, capital goods, and services also attracted inflows.
FPI outflows have continued into September, totaling $1.3 billion in the first three sessions.
Analysts expect selling pressure to gradually ease as India’s macro fundamentals remain steady and GST rate cuts support consumption.
The GST Council simplified the structure to two tiers, 5% and 18%, from four, with some exceptions for luxury and “sin” goods.
“The tax cuts provide a fillip to consumption, support the growth construct, improving the investment landscape,” said Anurag Mittal, head of fixed income, UTI AMC.
Analysts note that India’s relative valuation gap with other emerging markets has narrowed significantly over the past six to nine months, which may temper further outflows.
The Nifty 50 index has risen 4.6% in 2025 so far, underperforming the 18% gains in emerging market and a 17% jump in Asian peers.
(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Harikrishnan Nair)
