Sectors That Saw The Biggest Foreign Outflows In September

Foreign investors turned net sellers of Indian equities in September, snapping six consecutive months of buying, led by outflows from power, oil & gas, and metals and mining sectors.

The inflow of foreign equities into India had already slowed down in August due to rising bond yields in the U.S., a stronger greenback, and surging crude oil prices.

Overseas institutional investors offloaded $1,776 million, or Rs 14,768 crore, worth of stocks in September, according to data from National Securities Depository Ltd. They have been buyers since March after a selloff of Rs 28,852 crore in January and Rs 5,294 crore in February.

Foreign investors have bought Indian equities worth Rs 1,12,858 crore so far this year, NSDL Ltd. data showed.

Even after experiencing foreign fund outflows in September, India is still the largest recipient of FPI flows so far this year among emerging markets. The FPIs were sellers in Thailand, Taiwan, the Philippines, Malaysia, Indonesia, and Vietnam, according to Bloomberg data.

'Opportunity For Domestic Investors'

FPIs sold stocks in response to steady dollar index appreciation close to 107 and the steady rise in U.S. 10-year bond yields to around 4.7%, said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. The spike in Brent crude to $97 also contributed to FPI selling, he said.

"FII selling can be an opportunity for domestic investors who don’t have to worry about the dollar index and U.S. bond yields," said Vijayakumar. "When high-quality stocks in performing sectors like banking and capital goods decline, these can be bought for handsome long-term gains."

In September so far, even while selling in the market, FIIs were big buyers in financials and capital goods, he said.

'Global Concerns Will Continue To Weigh'

"Persistent FII selling in emerging markets, including India, in September has taken a toll on markets," said Shrikant Chouhan, head of research (retail), Kotak Securities. "If FII outflows gain pace, markets could be in for an extended downward spiral, as overseas investors would park their funds in the safe haven dollar securities."

'19,200 To Act As Support For Nifty'

The focus is now on the September quarter earnings, according to Kunal Sodhani, vice president, Shinhan Bank (global trading centre). It is also imperative to understand whether the U.S. Fed is eyeing one more rate hike this year, he said. "For Nifty, 19,200 acts as support, while for USD/INR, a break of Rs 83.28 may open doors towards Rs 83.60 levels."

Capital goods saw the largest inflow at $614 million, or Rs 5,100 crore, in September. In August, there was an inflow of $1,007 million, or Rs 8,336 crore.

"Even while selling FPIs, they were buyers of capital goods and selected financials," said Vijayakumar of Geojit Financial.

Financial Services saw the second largest inflow at $345 million, or Rs 9,959 crore, in September.

That is in contrast with financial services turning sellers in August after witnessing inflows for nine consecutive fortnights. The second saw the second-largest outflow at $784 million, or Rs 6,734 crore, in August. 

Consumer services sector witnessed the third-largest inflow of $413 million, or Rs 3,428 crore, in September. In August there was an inflow of $246 million.

Information and Technology saw the fourth largest inflow of $227 million, or Rs 1,886 crore. In August the sector witnessed an inflow of $495 million, or Rs 4,088 crore. After witnessing an outflow for 10 consecutive fortnights, the sector turned buyer in the second half of July.

Power witnesses the largest outflow at $1,172 million or Rs 9,731 crore. This comes after the sector witnessed an inflow of $1,398 million, or Rs 11,563 crore in August.

The sector witnessed the second-largest outflow at $630 million or Rs 5,231 crore. There was an outflow of $269 million in the previous month.

Metals and Mining saw the third-largest outflow of $609 million or Rs 4,616 crore in September. It witnesses the outflow of $840 million or Rs 6,953 crore in August.