Foreign institutional investors (FII) have been acting "fairly bullish" in Indian stocks, judging by their $11 billion in inflows into equities so far this year, but they have played it safe, according to a Citigroup study of their shareholdings.
FIIs are trimming their bigger overweights, such as financials and industrials, as well as some of their underweights such as IT services and energy, Citigroup says in a report on Friday.
"It's a lot of money that has come in, but it is not taking too many chances," the analysts add.
Still, Citigroup says foreigners portfolios are positioned for higher markets, tilting towards cyclical stocks, including banks, consumer discretionary and industrials.
By contrast, domestic investors remain sellers, buying into staples, materials and industrials, while being underweight on banks.
Citi sees market upside from current levels, with a Sensex target of 18,400 by December, and expect "only modest returns" from here.