Outliers! These 2 sectors defy FII wrath to pocket ₹48,000 crore in a year

This sustained FII buying has driven the BSE Capital Goods index 13 per cent in a year, and the BSE Metals pack 33 per cent against a near 3 per cent decline in the benchmark Sensex.

At a time when record foreign institutional investor (FII) selling made headlines, two sectors quietly remained in favour as smart money exited expensive consumption and IT segments and rotated into domestic, capex-linked cyclicals. 

 

Data shows that as FII selling in equity segment swelled to ₹3 trillion in the last one year, inflows into capital goods and metals & mining came in at ₹22,650 crore and ₹25,445 crore, respectively. These sectors saw consistent buying with only four months of net outflows, reinforcing a vote of confidence in India's multi-year capex and manufacturing cycle.

 

"Essentially, foreign investors were positioning ahead of where they expect the next earnings cycle to emerge rather than chasing defensive or export-dependent themes. It was conviction buying into a structural theme amid broad-based caution," said Vaqarjaved Khan, Sr. Fundamental analyst, Angel One.   

 

 

 

This sustained buying has driven the BSE Capital Goods index 13 per cent in a year, and the BSE Metals pack 33 per cent against a near 3 per cent decline in the benchmark Sensex. 

 

Hitesh Jain, Strategist - institutional equities research, YES Securities, said FIIs are increasingly pricing in a multi-year expansion in India's industrial economy, supported by strong government infrastructure spending, improving private-sector capital expenditure, and manufacturing-led growth. 

 

Metals & mining have also gained because every phase of industrial expansion translates into higher demand for steel, aluminium, copper and other industrial metals, which are essential inputs for infrastructure, construction, power transmission, automobiles and manufacturing, Jain added. For metals, firming global prices, China stimulus hopes, and domestic demand added momentum.

 

IIP data reinforces this narrative. Industrial production expanded 7.3 per cent year-on-year (Y-o-Y) in June 2026, the strongest pace in nearly two years. Importantly, manufacturing — the largest component of IIP — registered its strongest growth under the new series, suggesting industrial momentum is becoming broad-based rather than being concentrated in a few sectors.

 

Valuations woes ahead?

However, the massive buying and sharp rise in the index have to some extent pushed valuations for the two sectors ahead of fundamentals. 

 

Jain said, "Valuations across the broader capital goods universe have undoubtedly become richer after several years of sustained outperformance. Many companies benefiting from infrastructure, railways, defence and power equipment have already priced in a significant portion of the expected earnings growth, leaving less room for positive surprises. That said, valuation premiums can remain justified if India's investment cycle continues to strengthen."

 

While Khan agrees that valuations are ripe, leaving little margin for disappointment, he still finds value persists in the less-crowded pockets, such as power transmission & distribution, railways-linked equipment, and defence electronics, where order-book visibility is strongest, and the re-rating is earnings-backed rather than sentiment-driven.

 

As for metals, the Angel One analyst said, "The froth is more concerning because the earnings are cyclical. I'd be far more cautious paying peak multiples on peak-cycle profits."

 

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