FIIs turn net buyers in first fortnight

FIIs turn net buyers in first fortnight

Foreign institutional investors (FIIs) turned net buyers in the first fortnight of April and pumped in a net Rs 8,767 crore in Indian equities, according to Central Depository Services’ fortnightly sector-wise data. The reversal of trend at the beginning of the new financial year is significant, as the preceding fortnight in March saw net outflows of Rs 4,640 crore.

FIIs have largely been on a selling spree, with the previous two financial years accounting for combined outflows of $23 billion. Of this, FIIs pulled out $17 billion in FY22 and $6 billion in FY23.

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Sectorally, auto and auto components saw inflows of Rs 1,259 crore, with the total AUC at Rs 2.67 trillion. The sector saw inflows of Rs 2,695 crore in March and has been a consistent bet for FIIs since January.

“With emerging markets attracting foreign money again, FIIs no longer seem to be structurally negative on India. Softening of raw material prices has been the major factor for the auto and auto components sector, while the recent pause in rate hikes has come as a boon,” said Pankaj Pandey, head of research at ICICI Securities.

Surprisingly, the IT counter, which saw outflows of Rs 6,910-crore in the whole of March, raked in Rs 1,002 crore in overseas investment — the third most among sectors. The sector has seen a mixed trend since August 2022 in terms of FII inflows, registering inflows in five months and outflows in four.

According to Pandey, the beaten-down sector is more likely a contra bet, thanks to the heavy correction in tech stocks over the last few months. He said with the macroeconomic situation in the US improving, the sector could see better days in the second half of the year, though much hinges on how the results season and commentary pan out.

Strong fundamentals, cleaner balance sheets, and strong credit growth have turned the outlook around for the BFSI sector, which saw maximum inflows of Rs 4,410 crore during the fortnight. This sector had seen a whopping Rs 15,204 crore being withdrawn in January and Rs 556 crore in March, registering meagre Rs 105-crore inflows in February.

With an AUC of Rs 15 trillion, financial services have a 34.09% weightage in FII holdings in Indian equities.

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UR Bhat, co-founder and director of Alphaniti Fintech, said the improving environment in terms of inflationary pressure, and the recent pause in rate hikes has made FIIs warm up to Indian equities. He pointed out that events in the US will be keenly watched, and factors like geopolitical conflicts and further rate hikes could change the equation.

IT (10.54%), auto/auto components (5.83%) and financial services together account for almost 50% of holdings by FIIs, shows data from primeinfobase. Oil & Gas and FMCG account for 9.94% and 7.28%, respectively.