FIIs Shift Their Bet: Increasing Exposure to PSUs, Reducing Private Bank Holdings

Foreign Institutional Investors (FIIs) are reshuffling their India portfolios, raising exposure to Public Sector Undertakings (PSUs) while trimming stakes in several private sector banks during the June quarter. The increased allocation towards PSUs reflects growing optimism around sectors such as defence, power, capital goods, railways, and state-owned financial institutions, which continue to benefit from strong government spending, healthy order inflows, and improving earnings visibility. At the same time, FIIs have reduced exposure to select private banks amid concerns over slower net interest margin (NIM) expansion, intense competition for deposits, and relatively expensive valuations. While the long-term fundamentals of private banks remain intact, investors appear to be rotating capital toward sectors offering stronger near-term earnings momentum. This portfolio rotation highlights a shift in institutional preference rather than a broad change in India's investment story. Investors should continue to focus on earnings growth, valuation comfort, asset quality, and business fundamentals, instead of following institutional flows alone. FIIs are currently favouring sectors with stronger earnings visibility and government-led growth themes. However, sustained stock performance will ultimately depend on corporate fundamentals rather than changes in institutional ownership. $SBIN $HDFCBANK $INDIANB $KOTAKBANK