Foreign portfolio investors (FPIs) remained bullish on financial services, with automobile, oil & gas and fast-moving consumer goods (FMCG) being other sectors where foreign investors are increasing their exposure, NSDL data have showed.
In the first fortnight of May, foreign institutional investors (FIIs) pumped in a net Rs 24,740 crore into Indian equities — a six-month high — and more than the total investment in March and April combined.
Experts attribute the bullish bets by FIIs on Indian equities to the strong quarterly earnings season and the fundamental strength of the economy.
“FPI investment is seen continuing as prospects for the economy and the growth in corporate earnings appear bright. Since the rupee is strong and the dollar is expected to decline in near term, FPIs are likely to continue buying,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
Financial services remained the top bet for FIIs with net inflows of `8,382 crore during the fortnight under review. The sector had recorded `3,280 crore in inflows the previous fortnight. Analysts said the pause in interest rate hikes, which is likely to continue on softening of inflation, has likely increased the attractiveness of the sector.
Auto and auto components raked in rs 4,705 crore in the first half of May, a significant jump from Rs 728 crore in the previous fortnight. Oil & gas was the next big gainer with inflows of Rs 2,319 crore — more than double the Rs 936-crore inflow in the previous 15-day period.
“Auto and FMCG are driven by internal consumption. Rural demand is picking up, and the projected delay in monsoon won’t hamper prospects too much. India is a market that is tough to ignore now as far as foreign investors are concerned,” said market analyst Ambareesh Baliga.
Inflows into the FMCG sector more than doubled to Rs 1,664 crore from Rs 802 crore.
Baliga said India is the bright spot among the major Asian economies, and FIIs prefer to put money here.
The pharma sector stood out with a record Rs 1,957 crore in inflows, compared with`49-crore outflows in the second half of April. According to Pankaj Pandey, head of research at ICICI Securities, strong earnings visibility is bringing FIIs back to pharma, which has benefited from the sector rotation.
“In the US, companies into complex generics and specialty products are doing well and have reported strong earnings. Those specialising in oral solids are, however, struggling owing to pricing pressure, which is pulling their RoC down. Though margins were volatile thanks to raw material volatility until recently, they are expected to stabilise hereon,” Pandey said.
The IT sector, which saw the maximum outflow of `5,910 crore in the last fortnight, continued to fare poorly in the first half of May as outflows stood at `145 crore. Analysts said with tech spends by clients abroad yet to revive, the sentiment remained damp, leading to steady selloffs.