Financials and capital goods stocks were the most bought in the first fortnight of May by foreign portfolio investors (FPIs) at a time when benchmark indices continued to be in the green for a second consecutive month.
So far in May both, the Nifty and Sensex have gained nearly 2%. According to data from NSDL, stocks in the financial sector saw an inflow of Rs 4,728 crore by foreign investors followed by capital goods, which saw FPI inflow of Rs 2,233 crore, and oil & gas that saw Rs 2,130 crore worth foreign equity inflow. Auto, consumer services, services, and telecom also saw inflow of more than Rs 1,000 crore. Between 1-15 May, total FPI inflow into Indian equities was Rs 18,446.39 crore.
According to Siddarth Bhamre, head of institutional research at Asit C Mehta, this is typically a risk-on trade where the money is moving from defensive sectors to growth-related as the market is bouncing back. Among financials, he likes the private space more as the valuations are not expensive there. However, he believes that valuations are not cheap in capital goods and in that sector, people go by order books of the companies but execution remains a challenge. He advises investors to be selective.
The FMCG sector led the FPI outflow of Rs 1,057 crore. Realty, power, consumer durables and healthcare also saw outflows of Rs 842 crore, Rs 720 crore, Rs 622 crore, and Rs 606 crore respectively.
Vinit Bolinjkar, head of research at Ventura Securities said that the flows in financials were driven by expectations of a kick-start in credit growth as inflation and the interest rate come down. He believes while stocks in the capital goods will continue to be expensive, there are tailwinds as India emerges as a manufacturing sector.
At the same time, FMCG saw outflows as there are expectations that consumption as an industry will lag manufacturing, he added. Overall, he believes that foreign investors will remain buoyant as long as the US situation doesn’t turn any worse.