Foreign Portfolio Investors (FPIs) are continuing to reshuffle their portfolios in June, and the damage is clearly visible in two major sectors FMCG and power. These segments are bearing the brunt of heavy foreign selling, with NSDL data showing Rs 3,626 crore worth of FPI outflows in FMCG and Rs 3,120 crore in power, just in the first 15 days of the month.

This exit trend follows months of weakness. Between January and May, FMCG stocks lost over Rs 14,000 crore to foreign selling, while the power sector saw outflows exceeding Rs 9,000 crore.

FMCG Sector

Chokkalingam G, Founder of Equinomics Research, explains the core issue “FMCG companies have unfortunately become Slow Moving Consumer Goods companies in the last 3 years. Both revenues and operating profits grew in single digits. Moreover, they lost the tag of ‘Defensive Sector’.”

Market reaction echoed this sentiment on Monday (June 23). Largecap names like Hindustan Unilever (down 1.65 per cent), Britannia (down 1.01 per cent), and Patanjali Foods (down 1.84 per cent) were among the biggest drags. Even LT Foods sank 3.4 per cent.

Not all stocks were in the red though Gillette India (+2.08 per cent), Varun Beverages (+1.68 per cent), and Zydus Wellness (+1.21 per cent) defied the broader selloff.

Still, Chokkalingam’s message is clear: the sector’s earnings sluggishness and loss of investor protection status during corrections have prompted a structural FPI rethink.

Power Stocks

Power stocks, which were favourites throughout FY24, have now turned into a profit-booking zone.“Most power companies had stretched valuations. This fact seems to have led to selling of stocks in this sector by FPIs,” said Chokkalingam.

On June 23, NTPC Green Energy (down 1.96 per cent), Reliance Power (down 2.24 per cent), and Indowind Energy (down 2.11 per cent) led the losers’ pack. Other laggards included Power Grid (down 1.35 per cent) and Karma Energy (down 4.07 per cent).

Should you exit these sectors?

Chokkalingam believes this is not just sentiment-driven selling, but rooted in fundamental reality. For investors, this means being selective.

FMCG stocks might see revival only if rural demand or volumes improve, while power stocks may need a correction to become attractive again. “Fundamental reasons drove FPIs to reduce holdings,” he reiterated.

With FPIs turning cautious, investors may want to reassess overweight positions in these two sectors for now.