BENGALURU – Foreign portfolio investors (FPI) sold a record amount of Indian financials in January – the sector in which they have the largest holdings – after the country’s largest lender HDFC Bank posted disappointing earnings, according to National Securities Depository data.
The monthly selling in financials, worth about 300 billion rupees, snapped the FPI buying streak in Indian equities.
FPIs sold stocks worth 257.44 billion rupees ($3.10 billion) in January after a record monthly buying in December.
“We see FPI outflows in January as a temporary blip. They will likely turn net buyers in the next few months,” said Neeraj Dewan, director at Quantum Securities.
“The January FPI sale is predominantly due to the disappointment from the HDFC Bank results, which hurt sentiment,” added Dewan.
FPI selling triggered a 4.61% fall in financials and a 0.03% drop in the Nifty 50 index in January.
FPIs had turned net buyers in November and the monthly purchases hit a record in December on hopes of early rate cuts in the United States.
With gains of 5.52% in November and a subsequent climb of 7.94% in December, the Nifty 50 concluded 2023 with the best monthly gains since July 2022.
“While the onset of U.S. rate cuts could be delayed, resilience in the U.S. labour market and cooling inflation have strengthened the narrative that there shall be a soft landing,” said Mayuresh Joshi, head of equity research – India at William O’Neil and Company.
If the demand recovery plays out as expected, FPI inflows in the information technology sector should rise further over the next two quarters, Joshi added.
IT stocks witnessed FPI buying to the tune of 44.85 billion rupees, the most among major sectors, in January.
Despite posting lacklustre results, the IT index gained 3.16% during the month, driven by liquidity.
($1 = 83.0550 Indian rupees) (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sohini Goswami)