Foreign institutional investors have been withdrawing money from Indian equities amid rising US Treasury yields, a stronger dollar, and elevated crude oil prices. According to NSDL, FIIs made net investments of ₹13,972 crore in Indian equities during the July-September 2026 quarter, after withdrawing ₹1,43,142 crore in the preceding quarter. However, the trend reversed sharply in October as FIIs withdrew ₹46,849 crore from Indian equities across the first eight trading sessions of the month, taking their total outflows in 2026 beyond ₹3 lakh crore. Despite these outflows, FIIs are showing selective interest in microcap stocks with expansion plans across electronics, consumer durables, mining, and infrastructure sectors. The September quarter saw a recovery in foreign investment in Indian equities, though October witnessed renewed pressure.
The overall Indian equity market has been under pressure, with the Nifty 50 falling around 6% during the July-September quarter. However, the Nifty Microcap 250 delivered a positive return of around 8.7% during the quarter, climbing from 24,143 on June 30 to 26,250. This outperformance has attracted foreign investor attention, with FIIs raising their stakes in several microcap stocks during the quarter. The microcap segment's resilience comes as investors seek opportunities in smaller companies with specific growth stories and expansion plans. Interestingly, FIIs raised their holdings in multiple microcap stocks during the quarter, indicating selective interest in companies with strong fundamentals and growth prospects.
MIC Electronics Ltd. saw FIIs raise their stake by 14.78 percentage points during the July-September quarter, taking the total holding to 20.36% at the end of the quarter. The company, which designs and manufactures LED street lights, indoor and outdoor video displays, and mobile displays, secured total orders worth ₹269.87 crore for fiscal year 2027, of which ₹175.67 crore was pending execution. The company's LED displays are used by Indian Railways, sports stadiums, and transportation hubs, with ongoing projects including integrated passenger information systems and emergency lighting units for coaches. The rise in FII holdings comes alongside expansion plans across railway electronics and infrastructure projects.
Virtuoso Optoelectronics Ltd. saw FIIs raise their stake by 6.23 percentage points during Q2FY27, taking their total holding to 17.52% at the end of the quarter. The company, which manufactures consumer durables and electronic products, is expanding production capacity across air conditioners, compressors, and deep freezers. Management is targeting to increase air conditioner manufacturing capacity from 1 million units to 1.8 million units over the next 12-15 months, while compressor capacity is planned to reach 6 million units from the current 2.8 million units. The expansion aligns with growth plans across consumer durables and electronic products.
Sobhagya Mercantile Ltd. saw FIIs raise their stakes by 5.39 percentage points during the July-September quarter, taking the total holding to 19.22% at the end of the quarter. The company operates across infrastructure construction, mining, equipment leasing, and steel manufacturing, with growth outlook spanning coal mining, critical minerals, and steel manufacturing. The company holds a 40% stake in Adyal L.I.S., which received a ₹260.53 crore order for the construction of the Adyal Lift Irrigation Scheme under the Gosikhurd Project in Chandrapur district, Maharashtra, offering revenue visibility for the next 11 quarters. The rise in FII holdings comes alongside expansion plans across infrastructure and mining sectors.
