Sectors That FPIs Bought And Sold In The First Half Of May

Foreign investors turned net buyers in 2023 with a robust inflow in Indian equities in the first half of May.

Overseas investors net bought stocks worth $3.01 billion, or Rs 24,739 crore, in the first half of May, according to data from the National Securities Depository Ltd.

Foreign institutional investors snapped their two-month selling streak and turned net buyers of Indian equities in March, buying Rs 7,936 crore worth of stocks. This comes after a sell-off of Rs 28,852 crore in January and Rs 5,294 crore in February.

"Outlook for FPI flows has improved significantly, given the peak of the QT cycle in the U.S. and India's relative outperformance to global equities recently," ICICI Securities Ltd. said a note on May 17.

According to the note, the outperformance of Indian equities has been driven by the reduction in valuation premium of India to emerging market indices over the past one year and strong relative macroeconomics in terms of diminishing twin-deficit risk of fiscal and current account.

It also cited factors like rupee resilience, inflation dropping within the comfort zone of the RBI, in-line corporate earnings and the fastest growing large economy status in the world.

Rising valuations will be a key risk to the FPI flows towards India, the note said.

According to VK Vijayakumar, chief investment strategist at Geojit Financial Services Ltd., there is a distant change in the FPI strategy, with a clear tilt in favour of India.

"In the first three months of 2023, FPIs were continuous sellers in India due to India's premium valuations and the opportunities provided by the Chinese reopening and the relatively lower valuations in South Korea, Hong Kong and Taiwan," Vijayakumar said. "That phase is now over and India has once again become a favoured emerging market destination for FPIs."

In terms of sectoral flow, Vijayakumar said financials continue to be the favourite sector of FPIs. "They were buyers in capital goods and autos too."

Since the rupee is strong and the dollar is expected to decline in the near term, FPIs are likely to continue buying in India. The improvement in India's macros also favour continued inflows into India, he said.

Financial services saw the largest inflow of $1.02 billion, or Rs 8,382 crore, for the third consecutive fortnight. In April, the sector witnessed an inflow of $939 million, or Rs 7,690 crore.

During this period, the Nifty Bank index rose by 1.66%.

This sector witnessed the second largest inflow at $572 million, or Rs 4,705 crore. In April, the automobile segment witnessed an inflow of $243 million or Rs 2,010.88 crore.

In the first half of May, the Nifty Auto index rose 5.46%, according to Bloomberg.

The sector saw the third largest inflow of $282 million, or Rs 2,319 crore, in the first half of the month.

It saw an inflow of $114 million, or Rs 936 crore, in the second half of the month after witnessing an outflow of $69 million, or Rs 565.22 crore, in the first half of April.

The materials sector witnessed an inflow of $198 million, or Rs 1,638.49 crore, in the last fortnight. The sector saw an inflow of $143 million, or Rs 1,169.35 crore, in the second half of April.

This is the fifth consecutive fortnight of buying in its basic industries: metals and mining ($39 million or Rs 323 crore), cement ($74 million or Rs 607 crore), chemicals ($84 million or Rs 688 crore), and forest materials ($1 million or Rs 6 crore), according to NSDL data.

The sector saw the largest outflow of $41 million, or Rs 335 crore, after witnessing an outflow of $19 million, or Rs 153 crore, in the second half of April.

The Nifty Media index declined 0.78% in the first half of May, according to Bloomberg.

Software and services witnessed an outflow of $18 million, or Rs 145 crore, after the largest outflow at $723 million, or Rs 5,910 crore, in the second half of April.

During this period, the Nifty IT index rose 0.50%, according to Bloomberg data.