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After a 15-per cent pullback from their September peaks, benchmark Sensex and Nifty indices recovered some lost ground in the month of March, aided by noteworthy buying of Indian equities by foreign investors.
The BSE Sensex index climbed 5.76 per cent, whereas the NSE Nifty index advanced 6.3 per cent during the month, ACE Equity data shows. In the broader market, the Nifty MidCap 100 and the Nifty SmallCap 100 indices rose 7.84 per cent and 9.43 per cent, respectively.
This dramatic recovery in the markets was driven by foreign institutional investors (FIIs), who returned to the Indian markets mostly in the second half of the month, pouring in $3.6 billion.
An analysis of the inflows, as per JM Financial Institutional Securities, shows that the highest incremental flows were cornered by banking, financial services, and insurance (BFSI) sector ($1.7billion), followed by telecom ($360 million), and metals ($219 million).
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Within these, the interest in the BFSI sector, Kranthi Bathini, director-equity strategy, WealthMills Securities, said was on the back of inexpensive valuations.
"The BFSI sector has been consolidating on the bourses over the last one year. The consequent inexpensive valuation, along with the domestic nature of the sector, making it less vulnerable to external shocks, possibly attracted flows from foreign investors," he said.
The start of the monetary policy easing by the Reserve Bank of India (RBI) in February also triggered FII buying in the sector, he added.
On the bourses, the Nifty Bank and the Nifty Metal indices gained 6.6 per cent and 10.6 per cent respectively in March 2025, whereas on the BSE, their sectoral indices BSE Bankex and BSE Metal rose 8.55 per cent and 10.07 per cent respectively. The BSE Telecommunications index was up 6.48 per cent.
Meanwhile, analysts underlined the growth in average revenue per user (Apru) of telecom services providers as the likely reason for FII buying in the sector.
"Telecom companies' Arpu is moving up and positive management commentary from the companies could have attracted FIIs," said Ambareesh Baliga, an independent market analyst.
At the end of the December quarter (Q3FY25), Reliance Jio had 477 million subscribers, with an Arpu growth of 6 per cent quarter-on-quarter (Q-o-Q) to ₹207 per month. Airtel had 355 million subscribers, with Arpu growing 6.5 per cent Q-o-Q to ₹248 per month, and Vodafone Idea (Vi) had 201 million subscribers, with growth in Arpu of 5 per cent Q-o-Q to ₹164 per month.
What FIIs sold in March 2025?
As per JM Financial's report, FIIs reduced stake in the information technology (IT) sector ($973 million), fast-moving consumer goods (FMCG) ($643 million), Oil and Gas ($397 million), and autos ($327 million).
"Oil and gas sector, likely, saw FII selling due to fears of falling crude oil prices amid US trade tariffs," said Baliga. For autos, the slowdown in sales could have led to the outflows, he added.
That said, BFSI, IT, Oil & Gas, Auto, and Pharma sectors accounted for 60 per cent of FIIs' shareholding in India in March 2025. As a percentage of FII assets under custody (AUC) in India, the share of BFSI rose to 31.2 per cent from 30.8 per cent in February 2025, while that of Pharma rose from 6.8 per cent to 6.9 per cent, the JM Financial report said.
IT services saw a dip from 9.9 per cent to 9 per cent M-o-M, and Autos fell to 6.7 per cent from 7 per cent. Oil & Gas saw no change.
Should you buy?
Against this backdrop, Ambareesh Baliga said he remains bullish on India as he sees domestic equities outperforming other global peers.
"Uncertainty around US President Donald Trump's tariff decision is going to affect economies globally. Typically, global investors look at economies that are more stable and outperforming, and in that sense, India would emerge as one," he said.
Bathini, meanwhile, backs BFSI and telecom sectors and prefers HDFC Bank, Axis Bank, ICICI Bank, State Bank of India (SBI), Bank of Baroda, and Canara Bank.
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