The Sectoral Winners And Losers Of The Second Best Year Of FPI Inflows — In Charts
An overwhelming inflow of foreign funds even helped India’s benchmarks to scale new peaks.
Overseas inflows into Indian stocks are the best among emerging markets and the second highest ever so far this year, undeterred by global volatility and valuations concerns.
Net investments by foreign portfolio investors stand at Rs 1,62,285 crore till Dec. 22, according to data from National Securities Depository Ltd. That's second only to Rs 1.7 lakh crore in 2020, a year of pandemic-fuelled equity boom.
The net investments by foreign portfolio investors were led by financial services and capital goods sectors, followed by automobile and auto components sector, according to data from National Securities Depository Ltd. Oil & Gas and Information & Technology saw the highest outflows.
India also received the highest inflows among emerging market peers. Investors, both foreign and domestic, retained faith in the Indian market, backed by an economy that shrugged over geopolitical tensions, crude price rise and surging U.S yields. Nifty 50 has risen nearly 18% so far this year, while S&P Sensex up over 16%, scaling record highs.
Sectors With The Biggest Inflows
Financial Services
Financial Services witnessed the highest inflow this year at Rs 46,623, accounting for 28.72% of the total investments.
"We expect banking a sector to continue to do well, especially the banks within large caps as big banks have not completely participated in the ongoing rally so the next leg of rally can come from banks," said Ritiesh Bhansali of Mecklai Financial Services.
Nifty Financial Services Index rose 11.67% so far this year.
Capital Goods
Capital goods ranked second in receiving the overseas inflows this year at Rs 41,515 crore. That represents 25.58% of the total flows.
"Most of the capex is coming from the government as of now and with corporate balance sheets already deleveraged the expectation is that the private companies will also start their capex cycle as well," Bhansali said.
Automobile And Auto Components
The sector mopped Rs 29,053 crore to rank third, contributing 17.90% of overseas inflows. Nifty Auto Index has risen 40.97% so far this year.
Sectors With The Biggest Outflows
Oil & Gas
The oil & gas sector saw the biggest outflow worth Rs 26,224 crore from Indian stocks so far during the year.
Information & Technology
Information & technology ranked second worst with an outflow of Rs 10,833 crore. The Nifty IT, however, is up 24.51% year to date.
Best Among EM Peers
Of the Rs 1.63 lakh crore invested by foreign portfolio investors so far in 2023, Rs 35,585 crore or about 19% has come via buying in initial public offering.
December has also been the best month for overseas investments into equities at Rs 58,624 crore worth of buying by Dec. 22.
India remained the largest recipient of FPI flows this year among emerging markets. The FPIs were sellers in Thailand, the Philippines, Indonesia, Malaysia and Vietnam, according to Bloomberg data.
Outlook For 2024
According to a note by ICICI Direct Research, 2023 saw resumption in overseas flows as interest rate peaks and expectations of rate cut sets in.
"While Lok Sabha elections in India and Presidential elections in U.S. may trigger near term volatility (spike) in markets but declines are likely to be limited," it said.
"We expect 2024 to continue being a year of inflows in the range of 15-20 billion in equities as, well," Bhansali said.
India will continue to receive one of the highest inflows among emerging markets as the average growth of 12% over the last 10 years in equity markets has been the best among peers, he said. "However, the coming year will also bring in more volatility on both sides as well due to general election in both India and US lined up."
