After pumping in billions of dollars into Indian equities during November and December, 2023, foreign portfolio investors went on a reverse mode in January, as they dumped stocks worth about Rs 40,300 crore ($4.8 billion) across seven sectors.
But, one sector bore the brunt of the selling by FPIs and that was financial services. FPIs sold stocks worth over Rs 30,000 crore in the sector last month, according to the NSDL data.
This was after they net bought financial services stocks worth more than Rs 29,000 crore in December.
A significant part of this selling within the financial services sector was in private banks, particularly HDFC Bank, which is highly concentrated by FPIs.
HDFC Bank stock lost more than 14% in January, marking one of its biggest monthly losses since March 2020. The lender’s disappointing earnings triggered downgrades and prompted selling by the big bulls.
Fast moving consumer goods and automobile sectors were the next on the radar, as FPIs sold stocks worth more than Rs 2,000 crore in each of the sectors in January.
In both the sectors, they were net buyers of shares in the month of December.
Stocks in metals & mining and media & entertainment sectors were also sold by the FPIs.
In the media and entertainment sector, they sold shares worth Rs 1,746 crore in January, which was higher in value compared to Rs 1,248 crore in December.
Much of this selling is likely to have happened in Zee Entertainment Enterprises, following the fallout of the $10 billion merger deal with Sony Pictures.
Hit by the development, Zee Entertainment shares nosedived 37% in January, witnessing their biggest monthly loss since March 2020. FPIs own more than 28% stake in the Essel Group’s flagship company.
In the metals and mining sector, FPIs dumped stocks worth Rs 1,627 crore in January, after buying stocks worth Rs 1,311 crore in December.
What did FPIs buy?
Even though they were net sellers in January, FPIs found attractive bets in sectors like information technology, oil and gas, telecom, power, and capital goods. FPI dollars chased the IT sector for the third consecutive month in January, as they net bought stocks worth Rs 4,485 crore. Since November, they have pumped in over Rs 10,400 crore into the sector.
In the oil & gas sector, FPIs bought stocks worth Rs 3,467 crore last month, after selling shares worth Rs 542 crore in December.
The telecom and power sectors saw net buying of more than Rs 2000 crore each by FPIs last month.
Near term outlook
After some buying in the early part of February, FPIs have turned net sellers in the recent sessions. They have net sold stocks worth Rs 1,200 crore this month so far, largely due to volatile global bond yields.
Experts believe that FPI inflows into the equity market in the near term will depend on the trends in the US bond yields, besides the equity markets globally as well as in India.
If one looks at the historical data to gauge the inflows in the market in February, it shows positive conclusions. In the last 10 years, FIIs were net buyers of equities in February on six instances.
In January, while they sold equities, FPIs invested heavily in the debt market which saw inflows to the tune of more than Rs 21,000 crore, which is the highest inflows seen in a month since June 2017.
In the run-up to India’s inclusion to the JPMorgan Global Emerging Market bond index, experts see buoyant inflows into the debt market, while expecting selling to moderate in the equity segment.
(Data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)