The selling in Indian equities by foreign portfolio investors intensified in October as a sharp spike in the US bond yields amid concerns that interest will stay higher for longer triggered a risk-off mood on Dalal Street.
Data shared by the National Securities Depository Ltd (NSDL), showed that eight major sectors saw high selling by FPIs, with financial services bearing most of the brunt of it.
FPIs net sold shares worth Rs 28,933 crore or $3.5 billion across eight sectors, namely financial services, information technology, oil & gas, power, fast moving consumer goods, construction, consumer durables, and healthcare.
Financial services saw the highest selling by FPIs to the tune of Rs 11,804 crore in October. This is against a net purchase of over Rs 2,800 crore done in September. The Nifty Financial Services index shed 3% in the last month.
The second major sector that saw heavy selling was information technology to the tune of Rs 3,262 crore. This was against the net buying worth Rs 1,886 crore done by FPIs in September. The Nifty IT index slumped nearly 4% in the last month.
Volatile crude oil prices amid the geopolitical tensions in Israel weighed on the oil and gas sector, with FPIs selling shares worth over Rs 3,000 crore. This was, however, slightly lower than the over Rs 5,000 crore worth of selling in September.
The power sector witnessed selling by FPIs for the second consecutive month in October, though the pace reduced considerably. They net sold shares worth Rs 2,869 crore last month, compared to over Rs 9,700 crore in September.
Meanwhile, fast moving consumer goods remained out of favour for the big bulls, as they dumped stocks in this sector for the third consecutive month in October. FPIs net sold shares worth Rs 2,792 crore, compared to Rs 1,791 crore in September.
After seeing minor buying in September, both healthcare and consumer durable sectors saw selling of more than Rs 1,000 crore each in October by FPIs.
Will the exodus continue?
The rise in the US bond yield to multi-year highs past the 5% mark had turned foreign investors towards haven assets.
While the geopolitical tensions remain and pose some risks, some market experts believe that the pace of selling by FPIs may slow down in the near term.
The selling trend is unlikely to continue, going forward, since the main trigger for the same was rising bond yields, which has reversed, said V K Vijayakumar, chief investment strategist, Geojit Financial Services.
FII selling is likely to be subdued, and they may even turn buyers, not to miss the rally in the Indian market, Vijayakumar said, adding that frontline banking, automobiles, capital goods, and mid-caps in IT and real estate are poised to do well.
While the recent rally in the midcap and smallcap stocks have turned valuations a bit expensive, most money managers recommend using corrections to accumulate stocks as the long-term growth story of India remains intact.
“A breather in the market would be a better opportunity for investors to re-engage with Indian equities,” said Manraj S Sekhon, chief investment officer of Templeton Global Equity Investments.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
