FII Investments in Nifty Bank Index Stocks Surge in June Quarter

Strategic Insights -

Foreign institutional investors (FIIs) have consistently been a significant presence in India's banking and financial services sector, with their investments swinging between massive inflows and significant outflows. During the quarter ended June 2025, FIIs poured é 66,161 crore into the financial services sector, including banks, while their net equity investment stood at é 38,668 crore. However, the tables turned in the current quarter, with FIIs dumping equities worth é 64,589 crore, of which é 29,188 crore is linked to banking and financial services stocks.

Key Takeaways:

  • IndusInd Bank Ltd. has seen a significant increase in FII holdings, with their stake rising 4.15% points to 33.7% at the end of Q1FY26. This is despite the bank facing regulatory and compliance issues.
  • The growth prospects of IndusInd Bank, including its growing interest income and net profit, may have attracted FIIs.
  • AU Small Finance Bank Ltd. has also seen an increase in FII holdings, with their stake rising 2.1% points to 37.7% at the end of Q1FY26. This is as the bank prepares to transition to a universal bank.
  • The growth trajectory of AU Small Finance Bank, including its increasing interest income and net profit, may have attracted FIIs.
  • Both IndusInd Bank and AU Small Finance Bank are trading at a premium, with high price-to-earnings ratios and price-to-book value ratios.
  • The banking and financial services sector has consistently been a favorite of FIIs, with significant investments in both good and bad times.
  • The current quarter has seen a massive outflow of FII investments in banking and financial services stocks, contrary to their usual behavior.

Statistics:

  • é 66,161 crore poured into financial services by FIIs during the quarter ended June 2025
  • é 38,668 crore in net equity investment by FIIs during the same period
  • é 64,589 crore in FII investments dumped in the current quarter
  • é 29,188 crore linked to banking and financial services stocks in the current quarter
  • 4.15% points increase in IndusInd Bank FII holdings at the end of Q1FY26
  • 2.1% points increase in AU Small Finance Bank FII holdings at the end of Q1FY26
  • é 10,634 crore interest income by IndusInd Bank in Q4FY25
  • é 12,264 crore interest income by IndusInd Bank in Q1FY26
  • é 709 crore other income by IndusInd Bank in Q4FY25
  • é 2,157 crore other income by IndusInd Bank in Q1FY26
  • é 2,329 crore net loss by IndusInd Bank in Q4FY25
  • é 604 crore net profit by IndusInd Bank in Q1FY26
  • é 4,640 crore NII by IndusInd Bank in Q1FY26
  • 52% QoQ growth in IndusInd Bank NII
  • é 3,97,144 crore deposits with IndusInd Bank in Q1FY26
  • é 3,33,694 crore loan disbursed by IndusInd Bank in Q1FY26

Sources:

  • NSDL [1]
  • www.Screener.in [2]