fpis: These 3 sectors saw significant drop in pace of selling by FPIs; are the tables turning?


After selling Indian equities worth over $4 billion in September and October, foreign portfolio investors slowed down significantly in November, thanks to the easing US bond yields and better-than-expected earnings of India Inc.

In the first fortnight of November, FPIs net sold shares worth Rs 1,414 crore ($170 million), compared to Rs 14,764 crore ($1.8 billion) worth of selling in the previous fortnight, data by the National Securities Depository Ltd (NSDL) showed.

A notable slowdown in selling was visible in the financial services sector, one that has a high concentration of FPI investment. FPIs net sold shares worth Rs 1,566 crore in the first half of November, compared to Rs 7,336 crore in the second half of October. So far in November, the Nifty Financial Services index has net gained 1.6%.

The second sector where FPIs reduced their pace of selling was information technology. This sector is again over-owned by the big bulls. FPIs net sold shares worth Rs 1,179 crore in the first fortnight of November, compared to Rs 1,723 crore worth of selling in the previous fortnight. The Nifty IT index is the best-performing sectoral index in November as it has gained nearly 6% so far.

Fast moving consumer goods is the third sector which saw lesser selling by FPIs in value terms. In the first fortnight of November, FPIs sold shares worth Rs 1,056 crore, compared to over Rs 1,600 crore in the previous fortnight. The Nifty FMCG index has given 2.5% returns so far in this month.

While the three major sectors saw a notable reduction in selling by FPIs, there were few other sectors that bore the brunt of selling pressure.

Automobile stocks top this list, as FPIs net sold shares worth more than Rs 1,700 crore in the first fortnight of November. This was far more than Rs 385 crore worth of selling seen in the second half of October.

Meanwhile, FPIs turned net sellers in the capital goods pack in November as they dumped stocks worth Rs 213 crore. In the second half of October, they had net bought shares worth more than Rs 1,100 crore in the sector.

The power sector, which has been among the top performers in 2023, was also at the receiving end. FPIs sold stocks worth Rs 1,389 crore in November, following the sale of Rs 800 crore worth of shares in the second half of October.

Will the pace slow down?
Goldman Sachs’ Asia Pacific Equity Strategist, Sunil Koul believes that foreign inflows will be weak in the near term given the volatility in bond yields and a firm dollar.

On Monday, the rupee ended at a record closing low against the dollar.

Koul, however, expects foreign flows to pick up post the general elections, as India continues to remain an important investment destination.

V K Vijayakumar of Geojit Financial is of the view that as US bond yields ease further and the market starts discounting possible rate cuts by the US Federal Reserve in 2024, the scope for FPIs turning net buyers of equities will increase.

“If the declining trend in US inflation persists the Fed may cut rates by mid 2024, and this can facilitate FPI inflows into EMs like India,” Vijayakumar said.

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