After ditching in October, foreign portfolio investors made a comeback on Dalal Street in November, investing over Rs 9,000 crore or $1 billion into domestic equities.
However, the inflows weren’t broad based, as only four sectors witnessed capital flows exceeding Rs 1,000 crore. These sectors were consumer services, capital goods, healthcare, and realty.
The consumer services sector attracted maximum inflows in November to the tune of Rs 4,370 crore, after witnessing outflows of Rs 185 crore in October.
The capital goods sector witnessed foreign inflows of Rs 3,571 crore last month, nearly four times higher than the inflows of Rs 857 crore seen in October. The S&P BSE Capital Goods index rallied 9% in November.
After seeing outflows in October, the healthcare sector saw FIIs making a comeback and investing Rs 1,493 crore in November. The BSE Healthcare index gained more than 11% in November and was among the top sectoral gainers. Infact, in the last six months, the index has given more than 25% returns.
Outflow Check
The sectors that saw outflows of more than Rs 1,000 crore for the second month in November include fast moving consumer goods, financial services, and power.
However, the quantum of outflows was lower in FMCG and financial services sectors.
FPIs sold stocks worth around Rs 1,700 crore in the FMCG sector in November, compared to the sale of over Rs 2,700 crore worth of stocks in October.
In the financial services sector, they sold stocks worth Rs 3,993 crore in November, but this was significantly lower than the outflows of more than Rs 11,800 crore that the sector witnessed in October.
Power sector stocks have seen a strong rally in the past couple of months, but driven largely by domestic inflows, as FPIs were net sellers for the second month in a row in November. They sold stocks worth Rs 2,952 crore, compared with Rs 2,869 crore a month ago.
Flow story for December
December has kicked off on a very strong note for Dalal Street, as FPIs have poured in billions of dollars in just eight sessions.
As per NSDL data, the total inflows into India, including investment through the primary market, until December 8 stood at a whopping Rs 26,605 crore ($3.2 billion).
Indications of political stability after the 2024 general elections, strong growth momentum in the Indian economy, easing inflation, steady decline in the US bond yields and the correction in Brent crude oil prices are the factors that turned the situation in India’s favour.
“We expect the FIIs to also turn constructive, if the election outcome comes as expected,” said Shridatta Bhandwaldar, head – equities, Canara Robeco Mutual Fund.
If historical data is anything to go by, then FPIs have been net buyers of Indian equities on six occasions in the last 10 years.
“Going forward, FPI inflows are likely to continue. FPIs have turned buyers in leading banks where they have been sellers. Large caps in segments like IT, telecom, automobiles and capital goods are also witnessing buying. This trend is likely to continue,” said V K Vijayakumar of Geojit Financial Services.
While the factors remain conducive for inflows to continue, the US Federal Reserve’s monetary policy meeting this week will be crucial to determine sustenance of FPI inflows.
Any dovish commentary on interest rate trajectory can give a further fillip to the Santa rally on Dalal Street.
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