Foreign investors might be fleeing the Indian stock market amid tumultuous times but their liking for Indian banking and financial services sector along with technology stocks is still visible.
Foreign investors might be fleeing the Indian stock market amid tumultuous times but their liking for Indian banking and financial services sector along with technology stocks is still visible. Foreign Institutional Investors’ (FII) ownership in Nifty-500 has dropped to a 5-year low but still half of their funds are allocated towards banks, and the technology space despite the sharp corrections in the Indian equity markets, said a report by brokerage and research firm Motilal Oswal. “Financials have had a dominant run in the last few years with FIIs being majorly overweight on BFSI (Private Banks, NBFCs, Insurance, and PSU Banks),” the report said.
At the end of December 2019 FII allocation to the BFSI industry was 45% in the Nifty-500, this has come down to 39.8% post the sharp equity markets correction. However, FIIs still remain significantly overweight in BFSI by 810bp when compared to Nifty-500 BFSI weight in Nifty-500 currently stands at 31.7%. Towards technology FIIs have allocated 12.2% of the funds which is 1.9% more from the previous quarter. “Thus, BFSI along with Technology accounts for more than 50% of FII allocation if the Nifty-500 is used as the benchmark,” said Motilal Oswal. In terms of absolute holdings, out of total FII holding of USD310b, Private Banks is at the top with USD72b investment value.
Foreign investors pulled out record amounts from the Indian markets in the month of March, turning net sellers of $14.69 billion. Foreign investors have cut holdings in 90% of the Nifty50 companies. Tata Steel, Grasim, Eicher, and Axis Bank were the top stocks where FII reduced holding, while Bharti Airtel and Zee Entertainment witnessed increase in FII holding on QoQ basis. 67% of the Nifty-500 companies saw reduction in FII ownership, bringing holding down 140 basis points on-quarter basis.
Interestingly the sectors where foreign investors were seen being bullish, these were the same sectors where domestic institutional investors (DII) were underweight. DIIs were significantly overweight in Utilities, Capital Goods, and PSU Banks. “Overall, the top-5 sectoral holdings of DIIs in the Nifty-500 account for 67% of total allocations and these sectors are (a) BFSI (26.4%), (b) Consumer (14.1%), (c) Oil and Gas (10.7%), (d) Technology (10.1%), and (e) Healthcare (5.8%),” Motilal Oswal said.