FPIs Dump FMCG and Financial Services; IT Sector Sees Inflows
Foreign Portfolio Investors (FPIs) have made significant moves in the Indian market during the latter half of December. As global investor confidence in specific sectors fluctuates, let’s delve into the details of recent trends.
Key Trends in Foreign Selling
– Foreign investors withdrew a staggering ₹16,848 crore across 15 sectors in the last half of December.
– The FMCG sector faced the most substantial selling, with overseas investors offloading shares worth ₹4,425 crore. This was on top of ₹1,419 crore sold in the first half of the month.
– Cumulatively, from January to November, FPIs sold off shares worth ₹30,942 crore in the FMCG sector.
Financial Services Under Pressure
– The financial services sector also felt the impact, witnessing foreign selling of ₹4,009 crore in the latter half of December, bringing total withdrawals in the sector to over ₹10,000 crore for the month.
– Pankaj Pandey, head of retail research at ICICI Direct, observed that the FMCG sector is out of favor with global investors due to its high valuations and lower growth expectations.
Insights on Market Behavior
– Observers note that the selling in banks may be a reaction to margin recovery being postponed to the next quarter, particularly following the RBI’s interest rate cut in December.
– Foreign investors do not appear bearish on financials and banks; however, these sales could reflect a shift from private to PSU banks, stated UR Bhat, co-founder and director at Alphaniti.
The IT Sector: A Contrarian Opportunity
Despite the general trend of selling, the IT sector experienced a surge in foreign inflows, totaling ₹4,457 crore in the latter half of December. This marks the first influx after six months of significant outflows, totaling almost ₹76,000 crore from January to November.
– Pankaj Pandey suggested that dwindling global comfort with AI stocks has positioned Indian IT companies as attractive contrarian investments.
– While earnings recovery may be limited in the near term, IT stocks are trading at near five-year lows, potentially drawing foreign investor interest, he added.
Summary of Sector Movements
– FMCG Sector: ₹4,425 crore sold in H2 December; ₹30,942 crore withdrawn from January to November.
– Financial Services: ₹4,009 crore sold in H2 December, with total outflows exceeding ₹10,000 crore for the month.
– IT Sector: ₹4,457 crore inflows in H2 December, amidst nearly ₹76,000 crore outflows from January to November.
In conclusion, as FPIs reallocate their investments, the FMCG and financial services sectors face challenges. Conversely, the IT sector may present a promising alternative for investors seeking stability amidst shifting market dynamics.