Foreign portfolio investors pulled out a meaningful chunk of money from Indian equities in September amid risks of higher inflation and tighter monetary conditions.
FPIs net sold shares worth a whopping Rs 30,000 crore in 8 sectors last month, while investments worth over Rs 1,000 crore were made only in four sectors, data by NSDL showed.
The power sector, which had seen the highest inflows in August, saw the highest outflows in September. FPIs sold net shares worth Rs 9,731 crore last month, following a net investment of more than Rs 11,500 crore in August.
Volatility in global commodity prices and slowdown in China continued to keep FPIs away from the metals and mining sector. This sector saw net outflows of over Rs 5,000 crore in September compared to outflows of Rs 6,953 crore in August.
Selling by foreign investors in the oil and gas sector steepened in September, as they offloaded shares worth Rs 5,231 crore — more than double the amount of outflows in August.
After seeing strong inflows between March and July, fast moving consumer goods stocks were dumped for the second straight month in September. Increasing commodity prices and weak southwest monsoon rainfall somewhat dampened the growth outlook for the sector, prompting investors to partially book profits.
In the FMCG sector, FPIs sold shares worth Rs 1,791 crore in September, but this was lower than Rs 2,612 crore worth of shares they sold in August.
Inflow Picture
The one sector that has been unperturbed by the global macroeconomic crisis and geopolitical risks is capital goods. This sector saw foreign capital inflows for the eighth consecutive month in September.
The robust outlook for infrastructure growth, healthy order pipeline, and increasing progress on Make in India initiatives have driven strong interest in the capital goods sector.
Though the net inflows in this sector in September was lesser than that in August, it continued to top the FII shopping list. FPIs net bought shares worth Rs 5,100 crore last month. In the eight months to September, they have cumulatively invested Rs 33,930 crore only in this sector.
The second sector that was in favour was information technology, as it saw net inflows for the third consecutive month. FPIs invested Rs 1,886 crore in the IT sector in September, but this was sharply lower than the investments worth Rs 4,100 crore they did in August.
After seeing heavy outflows in August to the tune of nearly Rs 6,500 crore, the financial services sector witnessed inflows worth Rs 2,861 crore in September.
Outlook
With concerns around inflation and global macroeconomic risks taking centrestage, and bond yields rising, further capital outflows from FPIs in the short term is likely, believe analysts.
However, from a medium- to long-term perspective, they remain positive and see FIIs continuing to pour money as India’s macroeconomic conditions are far more conducive when compared to other economies, making it a preferable investment bet in the emerging market space.
“Over the medium- and long-term is indeed constructive and India is on the cusp of a multi-year growth cycle led by capex, credit growth, consumption & corporate profitability,” said Devang Mehta, director – equity advisory, Spark Capital Private Wealth Management.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
