Financial services bear maximum brunt of late-March FPI sell-off

Mumbai: Financial services were the hardest hit by the foreign investor selling in the second half of March, taking their outflow tally for the month from the sector to over ₹60,000 crore – the highest withdrawal since 2012. These investors dumped shares worth ₹28,824 crore in March 16-31 after withdrawing ₹31,831 crore in the first half of the month.

The selling in financials during the later part of March accounted for 43% of ₹67,081 crore pulled out across 21 sectors – their highest fortnightly selling since the second half of October 2024, when they dumped shares worth ₹71,502 crore. “Foreign holding is typically higher in banking stocks, and global investors could have pulled out money due to some valuation concerns after the rally in 2025,” said Sonam Srivastava, founder and CEO, Wright Research.

In March, Bank Nifty plunged nearly 17%, and benchmark Nifty dropped over 11% amid the global market sell-off sparked by the West Asia conflict.

HDFC Bank may have accounted for a portion of the outflow from financials.

“The governance concerns at HDFC Bank, following the unexpected resignation of chairman Atanu Chakraborty citing ethical differences, created a company-specific overhang on the entire banking pack,” said Bhavik Joshi, business head at INVasset PMS.

When the country’s largest private-sector lender is under a governance cloud, it gives foreign investors one more reason to head for the exit, he said. Automobiles and construction witnessed foreign outflows worth ₹7,691 crore and ₹6,179 crore, respectively, in the second half of March. In February, both sectors had seen inflows worth ₹3,586 crore and ₹4,487 crore, respectively, but had seen outflows in the first half of the month. “Although sentiment is weak, the valuations are attractive; however, foreign investors have delayed allocation due to geopolitical uncertainty that sparked off a risk-off sentiment across emerging markets,” said Srivastava. “This wasn’t a sectoral rotation; it was a macro exit from India as a trade,” said Joshi. “Apart from the quantum of outflows, what stands out in H2 data is how broad-based the selling was – barely any sector was spared.”