One of the biggest talking point for the market this November is the FII inflows seen thus far. The foreign institutional investors appear to have turned positive recently, with $8.2 billion net inflows since mid-October. Global investment bank Jefferies has identified potential “FPI flow beneficiaries.”
As per the 3 FPI ownership-focused screen that Jefferies runs, they believe key stocks like RIL, HDFC Bank Axis Bank, Kotak Mahindra Bank, UltraTech Cement, Max Health, Varun, JSW Energy, DLF, Indian Hotels and Sona BLW could possibly benefit from the FII buying seen since mid-October.
Jefferies outlined the rationale behind the stocks they believe could possibly benefit from the revival of the FII inflows. “Large cap valuations have turned reasonable, with the Nifty 100 trading at 18.6x 1-year forward P/E, 5% below its 10-year average. Also, India offers significantly low beta,” they added.
Given higher liquidity and FPI ownership, they see “large caps as the more direct beneficiary of revival in FPI flows. We highlight Reliance, HDFC Bank, Axis, Kotak, Max Health, JSW Energy, Ultratech, Indigo, Varun, IHCL, DLF, and Sona BLW as plays on FPI reversal.”
Jefferies report stated that the global investment bank has analysed 70 large active EM funds with $370 billion of combined AUM. That shows India is at only 0.1 ppt ‘Overweight’ as of September, well below the 10-year average of 2.2 ppt ‘Overweight’. As per the September data that Jefferies referred to, 61% of funds were ‘Underweight’ India.
According to sectoral analysis of FPI data by Jefferies, “Financials have seen the largest outflows since Sep’24 at $17 billion, followed by Consumer Staples at $11 billion and Energy/Autos/IT at $9 billion each.”
At the stock level, Jefferies believes that “the largest estimated outflows over Sep, 2024-Sep, 2026 were from Reliance Industries and HDFC Bank, ($8 billion each), ICICI and Axis Bank ($5 bn each), followed by M&M and Kotak Mahindra Bank ($3 bn each).”
Jefferies also listed out stocks that have seen the maximum drop in FPI ownership in the BSE 500 stocks universe. As per their estimates it “has fallen to lowest level in last 10 years to 17.3%” Vs 19.6% as on September, 2024.
For this analysis Jefferies has taken into consideration, “BSE 500 stocks with market cap above $5 billion for the largest decline in FPI ownership over September 2024 to September, 2026.”
As per the global investment bank, the “sharpest reductions are in Max Healthcare (-17ppt), Axis Bank (-13ppt), PayTM, 360 One WAM (-12ppt each), followed by Trent and GCPL (-11ppt each).”
Source: Jefferies estimates. Stock screen covers BSE 500 companies with market capitalisation above $5 billion.
“Alongside a decline in Neutral weight for India/stocks, individual stocks have seen a hit in their relative (to MSCI India) positioning too between Sep’24-Sep’26,” Jefferies added.
According to them, “HDFC Bank has seen the largest reduction, with its relative OWT falling 2.4ppt to 1.0ppt. Axis Bank positioning fell 0.4ppt, while Kotak Bank, Reliance Industries, JSW Energy, BHEL each saw positioning fall by 0.3ppt.”
“Sectorally, relative positioning has fallen most since Sep’24 in Industrials (-1.3ppt) and Financials (-1.0ppt).” they added.
FIIs have been persistent sellers in Indian equities since September 2024, “with net outflows of $61 billion and the first 10 months of 2026 seeing large outflow of $31 billion.” However, mid-October onwards, FII sentiment towards India has seen some glimmer of hope. Since then net FII inflows are close to $8.2 billion, and $5.8 billion came in just 6 trading days of November.
As a result, Jefferies has identified the sectors and stocks that had borne the brunt of the outflows. Whether these are the very destinations that FIIs return to is something we have to wait and watch for actual shareholding updates.