FPI Shift: IT Out, Infra In for FY26; What's Next for FY27?

FPIs executed a significant sector rotation in FY26, divesting from the Indian IT sector and other defensive stocks. Concurrently, they increased their allocations to infrastructure-linked sectors such as capital goods, telecom, and metals, driven by evolving earnings visibility.

This FPI rotation is a crucial indicator of institutional sentiment and future sector performance. It suggests a belief in India's domestic growth story, particularly in infrastructure development, over export-oriented or traditionally defensive sectors. This trend could dictate market leadership in the coming fiscal year.

The IT sector (e.g., TCS, INFY, WIPRO) is likely to face continued selling pressure or underperformance due to FPI outflows. Conversely, capital goods (e.g., L&T), telecom (e.g., BHARTIARTL, RELIANCE), and metals (e.g., TATASTEEL, HINDALCO) could see sustained buying interest and potentially outperform, benefiting from increased FPI allocation.

Traders should monitor FPI flow data for FY27 to confirm the continuation of this trend. Look for earnings reports from infrastructure-related companies for signs of improved visibility and watch for any policy announcements supporting domestic capital expenditure. Any reversal in global economic sentiment could also impact FPI allocation strategies.

• •Record outflows in FY26 masked a sharp rotation by FPIs.
• •Investors exited IT and defensive sectors.
• •FPIs selectively backed capital goods, telecom, and metals.
• •Shift driven by changing earnings visibility.
• •Risk flag: Global economic slowdown impacting FPI sentiment