When foreign Institutional Investors (FIIs) buy or reduce stakes, the ground moves under India’s stock market. Their large-figure decisions often trigger sharp stock reactions.
In recent quarters, FII flows have been unpredictable as India’s union election, the US presidential race, geopolitical tensions, and tariff worries kept Indian equity markets volatile. FII money tends to be hot money, and as news headlines shifted, the mood among FIIs yo-yoed between bullish and bearish.
FIIs hold 18.8% of Indian equities. They sold stocks worth Rs 2.5 lakh crore over the past year due to higher US bond yields and valuations which gave them better returns. Despite FII selling, the Nifty 50 gained nearly 6.3% over the year, helped by strong domestic institutional inflows and better-than-expected corporate earnings in Q3 and Q4.
FIIs have reduced their exposure to cyclical sectors, such as Oil & Gas, Cement, and Information Technology. They increased their stake in domestic growth-oriented sectors such as Banking and Finance, Capital Goods, and Automobiles, including companies like GE Vernova T&D, Home First Finance, Voltas, and Transformers & Rectifiers.
Vinit Bolinjkar, Head of Equity Research at Ventura Securities, said, “FPIs have sold significantly over the last few months, but this has been completely absorbed by DIIs despite low participation from retail investors. With the market rallying sharply from the March lows, we won’t be completely dependent on global flows only. This will give more confidence to domestic investors.”
In this edition of Chart of the Week, we will analyse the top sectors and stocks with the highest increase in FII holdings over the past year.
FIIs chase banking and finance on strong earnings, low valuations
Foreign institutional investors (FIIs) invested Rs 78,086 crore in Banking and Finance over the past year, accounting for nearly half of the total Rs 1.6 lakh crore inflows. This investment helped the Nifty Financial Services Index climb 18.4%.
Improved asset quality and strong earnings in each quarter of FY25, along with valuations below the 5-year average of 20.6x, and expectations of Reserve Bank of India (RBI) rate cuts, strengthened FII interest in the Banking and Finance sector.
Consequently, FIIs increased stakes in companies with stable net profit and asset quality, such as Aptus Value Housing Finance, Home First Finance, Nuvama Wealth Management, and KFIN Technologies.
Aptus Value Housing Finance saw its FII holding rise by 8.2 percentage points to 27.7% in March 2025. Over the past five years, the company’s revenue grew at a CAGR of 28% and a net profit CAGR of 28.9%. It maintained a stable operating margin of 82.2%, supported by rising loan disbursements and assets under management (AUM). The stock trades at a reasonable valuation based on its five-year price-to-earnings.
Nuvama Wealth Management saw its FII stake rise by 9.6 percentage points to 16.6% in FY25 after promoters sold part of their holding. The NBFC improved its return on equity (RoE) by 15.2 percentage points to 31.5% over the past five years, driven by better asset quality and growth in its capital markets and wealth management segments. These factors lifted its share price by 39.3% over the past year.
Pharmaceuticals gain traction post surprise outperformance in H1FY25 results
The Nifty Pharma index gained 10.7% over the past year, outperforming the benchmark Nifty 50 by 3.2 percentage points. The defensive sector, Pharmaceuticals and Biotechnology, attracted Foreign Institutional Investor (FII) investments totaling Rs 16,089 crore since May 2024.
The government’s Production-Linked Incentive (PLI) incentives for drug intermediates helped companies improve margins and expand capacity. Strong domestic sales and exports drove pharmaceutical firms to exceed revenue and profit estimates in H1FY25. The shifting supply chain from China to India prompted FIIs to raise their holdings by up to 7.2% in companies such as J B Chemicals & Pharmaceuticals, Lupin, Gland Pharma, and Divi’s Laboratories over the past year.
J B Chemicals & Pharmaceuticals saw its share price rise 130% over the past three years. During the same period, revenue grew at a CAGR of 17.1%, driven by growth in the domestic formulation business and Contract Development and Manufacturing Organisation (CDMO) segment, supported by a healthy order book and new project wins. FIIs increased their stake in the company by 7.2 percentage points to 18.3% over the past year.
On the company’s growth plans for the CDMO segment, Nikhil Chopra, CEO, said, “We plan to double our CDMO business to $100 million over the next four years from the current $50 million, which accounts for 12% of our total revenue.”
Divi’s Laboratories’ stock hit an all-time high of Rs 6,764 on May 26 after strong Q4FY25 results. Over the past year, FIIs increased their holdings by 3.3 percentage points to 18%, fueled by growth in the Active Pharmaceutical Ingredient (API) segment and improved profit margins. The stock gained 45.7% during the same period.
The company earns 88% of its revenue from international markets. The management expects revenue from the custom synthesis and APIs segment to grow steadily by around 15–18% in FY26. To boost exports, it plans to invest up to Rs 700 crore to expand its custom synthesis capacity.
The government's infrastructure push draws FIIs to capital goods
The Indian government’s push for infrastructure development and utility modernisation has benefited the capital goods sector. Rising public and private order books have boosted companies like GE Vernova T&D India, Transformers & Rectifiers, Inox Wind, and Thermax. As the global supply chain is shifting away from China, these manufacturers are seeing a surge in export orders.
GE Vernova T&D’s share price rose 44.3% over the past year, driven by strong demand from PSU clients, and doubled its order book to over Rs 12,600 crore in FY25. FIIs increased their stake by 11.8 percentage points during the year.
The company aims to increase international business to 30% of revenue by FY27 and plans to invest Rs 140 crore to expand manufacturing capacity for its High Voltage Direct Current (HVDC) systems.
On the growing order book from the energy sector, Vice President Johan Bindele said, “Our order backlog has tripled over the past year, driven by strong demand for transformers, switchgear, and grid technologies.”
Inox Wind holds a 15% market share in the wind turbine manufacturing industry and saw its share price rise 18.6% in the past year. After seven years, the company became profitable in FY25 by shifting to high-margin 3 MW and 4 MW turbine production and expanded its market reach in the renewable energy industry.
In July 2024, the promoter infused Rs 900 crore to improve operational flexibility and expand manufacturing capacity. The capital supported operations and raised the order book by 21% to Rs 3,203 crore in FY25. FIIs raised their stake by 6.2 percentage points to 15.7% in FY25.
Shifting consumer habits attract FII investments in consumer durables
The Consumer Durables sector is experiencing strong growth, driven by rising incomes, urbanisation, and shifting preferences toward branded, technologically advanced products. Favourable monsoons and growing rural demand also boost sales for companies like Voltas, Whirlpool, RR Kabel, and Dixon Technologies. Additionally, government incentives, including the PLI scheme, are helping companies improve margins and support capacity expansion.
Voltas holds a 19% market share in the room air conditioner industry. Over three years, revenue grew at a 24.7% CAGR and profit by 18.6%, driven by strong sales and a better product mix.
In-room air conditioners and air cooler business accounts for 73% of Voltas' total revenue. In Q4FY25, revenue from this segment grew 200 basis points, outperforming its peer Blue Star, driven by higher orders from international markets like the UAE and Saudi Arabia. In FY25, FIIs increased their stake by 7.3 percentage points to 22%.
To boost local manufacturing of air conditioner components, the government introduced the PLI scheme with an investment of Rs 6,238 crore in FY22. In addition, the company is investing Rs 450 crore to increase its compressor production capacity to 2 million units by FY27 and expand its distribution network in South and West India.
Dixon Technologies holds a 60% share in the mobile Electronics Manufacturing Services (EMS) market. The company manufactures eight of the top ten global smartphone brands. It has benefited from five PLI schemes in mobile phones, telecom equipment, and lighting product manufacturing. The ongoing global tariff war and the China+1 strategy have positioned Dixon Tech as a viable alternative for mobile phone manufacturers.
The company invested Rs 600 crore in backward integration, which boosted its net profit margin to 3.1% in FY25, and FII's stake in the company rose by 3.9 percentage points to 21.8%.
Dixon plans to increase phone manufacturing capacity to 60 million units by 2027, up from 45 million in FY25, driven by rising orders from new and existing clients. Saurabh Gupta, Chief Financial Officer, said, “We expect 40–45% revenue growth this year, supported by operational efficiencies, backward integration, and a higher contribution from our refrigerator business, which should expand margins by 20–25 basis points. We also plan to scale up IT hardware production in FY26 and display module manufacturing in FY27.”
