Also read Pulse of the Street: A five-day rout makes market jittery
Winners: The cyclical surge
Telecom stood out as the strongest foreign investor favourite for a third straight year, drawing uninterrupted inflows despite broad market volatility. Mint analysis of CMIE data shows overseas investments into the sector rose from ₹5,529 crore in 2023 to ₹23,737 crore in 2024, before jumping further to ₹48,222 crore in 2025. This steady appetite came even as most other sectors were hit by heavy foreign selling.
Oil & gas, which had witnessed sharp outflows of ₹22,813 crore in 2023 and ₹56,340 crore in 2024, staged a clear turnaround with ₹8,431 crore in inflows in 2025. Metals, mining and chemicals typically influenced by global demand cycles—also moved back into positive territory, attracting ₹4,661 crore and ₹6,017 crore, respectively, marking their strongest foreign buying in three years.
“In 2025, foreign portfolio investors (FPIs) pivoted sharply toward cyclical sectors like telecom, oil & gas, chemicals, and metals, channeling billions into these areas amid attractive valuations and robust earnings momentum,” said Akshat Garg, head of research and product at Choice Wealth.
“Telecom drew heavy inflows on strong performers like Bharti Airtel and 5G rollout tailwinds, while oil benefited from Reliance Industries’ stellar refining margins and global energy demand. Chemicals and metals appealed due to domestic infrastructure capex, supply chain shifts, and hopes of Chinese recovery, offering better entry points compared to overstretched defensives.”
According to Anil Rego, founder and fund manager at Right Horizons PMS, cyclicals were entering 2025 with a favourable risk-reward profile. He said many of these sectors were emerging from multi-year downturns, helped by tariff repair, lower capex intensity and better pricing power. Metals and chemicals benefited from the bottoming out of global inventory cycles, while China’s supply-related pressures eased. He added that global investors were positioning for a late-cycle recovery theme built on hopes of a soft landing in the US, stable global growth and eventual rate cuts. In such phases, cyclicals tend to outperform when earnings upgrades coincide with valuation mean reversion.
Losers: The great unwinding
The most aggressive selling came from information technology. The sector saw modest outflows in 2023 and a brief return of inflows in 2024, but the trend reversed sharply in 2025 with a steep ₹74,698 crore exit. Consumer-facing businesses also struggled. FMCG outflows accelerated for a third straight year, rising from ₹20,191 crore in 2024 and then jumping to ₹36,786 crore in 2025. Consumer durables and services faced similar pressure, with their highest outflows of ₹21,369 crore and ₹16,524 crore during the year.
also read Steel over power: Is Bharat Coking Coal’s IPO strategy worth a bet?
The reversal extended to auto and capital goods, which had been strong beneficiaries in previous years. Automobiles and components saw ₹11,898 crore exit in 2025, while capital goods recorded an outflow of ₹2,581 crore. Even financial services—long considered a core FPI holding—turned negative with ₹14,903 crore in outflows. The power sector saw intense selling pressure of ₹26,522 crore.
Analysts attribute the exits to stretched valuations and slowing earnings momentum. Rego said IT, FMCG and parts of BFSI were trading at meaningful premiums early in 2025 even as business conditions weakened. In IT, discretionary tech spending stalled; in FMCG, volume growth stayed erratic; in BFSI, investors grew cautious about credit cost normalisation and stricter capital requirements. Garg added that global slowdown fears, rural demand weakness and lack of broad-based consumer recovery further weighed on sentiment.
What comes next?
Looking ahead, analysts expect the sharp rotation seen in 2025 to gradually cool rather than intensify. Garg said this cyclical tilt looks set to moderate rather than accelerate over the next 2-3 quarters into mid-2026, as broader FPI re-entry gathers steam amid stabilizing macros. Earnings acceleration to 16% CAGR, benign inflation, and 7.5% GDP growth could lure funds back to IT and financials, especially with AI tailwinds and bond index inclusions. Persistent rupee pressures and US policy risks linger, but easing global rates could prompt rotation over reversal—favoring balanced portfolios blending cyclicals with quality defensives. Domestic inflows from SIPs will cushion any volatility.
Rego expects FPIs to continue favouring structurally strong cyclical names but said the easy phase of re-rating is likely over. He sees future flows being driven more by company-specific fundamentals such as earnings visibility and free cash flow generation rather than broad sector themes. Selective re-entry into IT and consumer sectors is possible if valuations turn reasonable and earnings stabilise. For investors, he said the environment favours a bottom-up approach over chasing sector narratives.
