Sectors FPIs Bought And Sold In The First Half Of January

Oil, gas and consumable fuels, power, financial and consumer services recorded the biggest foreign inflows in the first half of January.

Automobiles and auto components, media, fast-moving consumer goods, information technology and capital goods witnessed outflows in the period, according to data from the National Securities Depository Ltd.

Foreign portfolio investors kicked off the new year on a cautious note, investing a net of Rs 3,433 crore in Indian equities till Jan. 15. However, foreign investors have sold Rs 3,852 crore in the year so far, NSDL data showed.

This move comes amid heightened geopolitical tensions, reflecting a careful approach by investors even as the market continues to hit new record highs. Inflows have slowed from what was witnessed in December, when overseas investors poured in record funds worth Rs 66,135 crore.

Foreign institutional investors are exercising caution on emerging markets, considering the possibility that the U.S. Federal Reserve may not implement rate cuts as aggressively in 2024 as initially forecasted, according to Vinod Nair, head of research at Geojit Financial Services Ltd.

"Sector rotation and the safety of equity should be the key strategies of retail investors. Sectors deemed secure include IT, pharma, infra and FMCG," Nair said.

Domestic equities saw corrections on the basis of a hawkish Fed, disappointing Chinese economic data, a sharp rise in the U.S. bond yields and dollar index, along with the Red Sea and Middle East tensions, according to Kunal Sodhani, vice president of Shinhan Bank. "India still continues to remain a growth story, and such drops can be considered as adding fundamentally robust stocks and sectors."

India's strong macro environment and the expected U.S. rate cuts are strong tailwinds for its market. However, the country's rich valuations may be a worry as the FIIs are likely to explore underperforming markets, such as China and Europe, according to a BNP Paribas report.

India has been the largest recipient of FPI flows among emerging markets in the last 12-months. On a year-to-date basis, it witnessed an outflow of $717 million, according to Bloomberg data.

The FPIs have sold a massive equity of Rs 20,480 crore in the last two days, according to VK Vijayakumar, chief investment strategist at Geojit Financial. "This is partly in response to the rising bond yields in the U.S., where the 10-year yield has risen to 4.16%, and partly due to the high valuation in the Indian stock market."

Vijayakumar pointed out that since the largest chunk of the FII assets under management are in banks, they have been selling in banks, mainly HDFC Bank Ltd.

Investors should remember that in the tug of war between the FIIs and domestic institutional investors in recent years, the DIIs always won in the medium to long term, even though the FII selling could cause short-term pain, according to Vijayakumar.

Foreign investors maintain a positive outlook on the debt market, injecting Rs 10,525 crore during the period under review, according to the NSDL data.

The surge in debt flows is attributed to the inclusion of domestic bonds in JPMorgan's Emerging Market Global Bond Index. This factor has significantly influenced the increased flow of funds into the country's bond markets in recent months.