Synopsis: Foreign investors have started buying again after weeks of selling, but the money isn’t going everywhere. Some sectors are back in favour while others continue to see steady outflows, painting a mixed picture for markets.
June brought a shift in mood among overseas investors in Indian markets. After a tense start driven by global conflict worries, selling pressure eased once tensions cooled. Yet this turnaround wasn’t uniform. Certain sectors attracted fresh interest while others kept losing favour, showing that the recovery in sentiment is still patchy rather than a broad rush back into Indian equities.
Where the Buying Picked Up
Financial services led the pack in June, pulling in close to $357 million in foreign money, making it the top choice for the month. This wasn’t a small shift either, since the sector has otherwise been one of the bigger sources of outflows this year, so seeing it top the buying list stands out.
Close behind, the services sector drew $306 million, and consumer durables attracted $204 million. Consumer services also joined the buying list with $130 million, notable because it marked the first monthly inflow after five straight months of selling. Real estate and textiles rounded off the gainers with smaller inflows of $85 million and $10 million.
Sectors Still Under Pressure
While some pockets saw renewed interest, others continued to bleed foreign money. Oil & gas faced the sharpest selling in June, losing $1.4 billion, followed by automobiles at $1.1 billion and metals at $961 million. Technology wasn’t spared either, shedding $788 million.
What caught attention was capital goods slipping into outflow territory for the first time in six months, with $425 million pulled out. FMCG kept up its long losing streak too, now stretching to eleven straight months of outflows, while technology and telecom extended their run of selling to six months in a row.
The Bigger Picture for the Year
Zooming out to the full calendar year so far, the story looks a little different. Capital goods remains the top sector for foreign inflows in 2026, having drawn $2.3 billion despite the June setback. Metals follows with $1.4 billion, and services has picked up $600 million over the same period.
Metals stands out as the only sector to see positive foreign inflows in both this year and the previous one, a signal that global investors continue to see long-term value there even though short-term flows can swing.
Domestic Money Keeps the Market Steady
Even as foreign investors pulled out close to $29 billion from Indian equities this year, and more than $60 billion since markets peaked in September 2024, domestic investors have quietly stepped up. Between October 2024 and June 2026, domestic institutions poured in a massive $162 billion, cushioning the market from the impact of sustained foreign selling.
This shift has changed who really owns Indian equities. Foreign ownership in the Nifty 500 has slipped to a record low of 17.1% as of March 2026, while domestic ownership has climbed to an all-time high of 20.9%. That’s a meaningful change in the balance of power within Indian markets.
What Might Come Next
The gradual improvement in foreign flows could be an early sign of sentiment turning, though a lot still hinges on global developments. Much of the current caution stems from global investors chasing opportunities tied to artificial intelligence elsewhere. As that trend matures, attention could broaden to other opportunities, and India’s more reasonable valuations could start looking attractive again.
For now, the message is one of cautious optimism. Selling has slowed, some sectors are back in favour, and easing geopolitical tension along with softer oil prices are helping the mood. But this recovery remains selective, and it will likely take more time before foreign investors return with full conviction.
Written by Rahul kumar
