Synopsis: India’s telecom sector is entering one of its strongest investment phases, with FIIs and DIIs sharply increasing their exposure through 2025. The surge in capital inflows signals a potential multi-year upcycle, positioning the sector for a major boom in 2026.
Earlier this year in June, the telecom sector had seen a powerful resurgence in institutional interest. This was when Mutual Funds had invested Rs 5,730 crore in telecom stocks, while FIIs had poured over Rs 8,089 crore, nearly 41 percent more than domestic funds.
Across 2025 as a whole, FIIs have now invested close to Rs 43,000 crore into the telecom space. This marks one of the strongest annual inflow trends among all Indian sectors, reflecting a clear structural shift rather than short-term opportunistic buying.
FIIs have increasingly viewed telecom as a long duration and high conviction investment that has a theme tied to India’s digital transformation. The key growth drivers include expanding connectivity, rising digital infrastructure investments, spectrum efficiencies, along with monetisation potential of enterprise 5G services.
Another point to note is the sharp shift in institutional activity. During the same period, FIIs were net sellers in several previously preferred sectors which includes- IT, FMCG, power, consumer durables, and healthcare.
This shift highlights a move away from globally sensitive or consumption- heavy segments and more towards domestic digital infrastructure plays, where future earnings are considered more predictable and insulated from global volatility. Telecom’s stable cash flows, improving unit economics, and long-term relevance makes it an ideal destination for reallocated institutional capital.
The Key Drivers Behind the Boom
Tariff Hikes and ARPU Expansion-
Telecom operators are expected to implement tariff hikes over the next few quarters, which when combined with other factors such as- premium plan adoption and rising 5G usage, and projected increase in ARPU, all these could significantly boost sector wide profitability.
Strengthening Balance Sheets and Improved Unit Economics-
Reduced leverage, better cost structures, and improving receivable cycles have strengthened the telecom sector. Operators are entering a phase of sustainable profit growth, making telecom an increasingly attractive long-term opportunity.
The Reliance Jio IPO Effect-
The anticipated Reliance Jio IPO in early 2026 is emerging as a major catalyst. Expected to be one of India’s largest listings, the IPO is creating a halo effect across the entire telecom industry. Institutions are positioning themselves early to benefit from potential re-rating across telecom and adjacent digital businesses.
Beyond Jio, institutional investors have also heavily backed two other major players, which are Bharti Airtel and Tata Communications, as they have emerged as key institutional favourites in the telecom sector, which are being driven by strong financials and strategic moves toward high growth digital businesses. Airtel continues to attract strong FIIs and DIIs inflows with its steady deleveraging, improving cash flows, rising ARPU, and expanding enterprise and fiber operations, and consistent performance from its Africa business factors that provide long-term earnings visibility.
Meanwhile, Tata Communications has even seen a significant surge in its DII ownership, as it went from 13.45 percent in Sept 2024 to 14.51 percent in Mar 2025 and further to 19.03 percent in Sept 2025. This reflects strong institutional confidence in its transition from a traditional telecom operator to a global digital ecosystem leader. With rising momentum in cloud services, cybersecurity, global data connectivity, and networked digital platforms, Tata Communications demonstrates the broader sectoral pivot toward scalable, digital-first business models.
Jefferies expects telecom to deliver the strongest EPS growth among major Indian sectors, with Airtel projected to post 74 percent profit growth in FY26 and 37 percent in FY27. Indus Towers is also seen progressing steadily with an estimated growth of 14 percent in FY26 and 7 percent in FY27.
This renewed momentum is being powered by tariff rationalisation, premiumisation, improved spectrum utilisation, and more efficient receivable cycles, all these kinds of factors have collectively positioned the industry for multi-year profitability.
Global brokerages- Jefferies and JPMorgan have turned sharply positive on the Indian telecom landscape, upgrading the sector to an overweight rating and forecasting a robust 14– 25 percent earnings CAGR over the coming years.
Their optimism is anchored in rising pricing power, accelerating demand for high-margin enterprise 5G services, and strengthened spectrum efficiency. A significant reduction in operational and financial stress across telecom operators has further boosted confidence. These upgrades have also triggered substantial foreign capital inflows, creating a reinforcing cycle of sector re-rating and long-term institutional interest.
-Adithya Menon
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