Sectors That FPIs Bought And Sold In August

Foreign investors bought Indian equities for the sixth straight month in August. However, the pace of inflows slowed during this period due to rising bond yields in the U.S. and a strong greenback.

Overseas investors were net buyers for 10th consecutive fortnight and picked stocks worth $1,480 million, or Rs 12,262 crore, in August, according to data from the National Securities Depository Ltd.

Foreign investors have bought Indian equities worth Rs 1,35,948 crore so far this year, NSDL Ltd. data showed.

"The most recent surge in U.S. yields from 3.75% to 4.3% was triggered by the rating downgrade by Fitch and is putting pressure on FPI flows towards India," ICICI Securities said in an Aug. 19 note.

"However, the U.S. 10-year bond yield is likely near its upper range given the outlook for inflation. This should alleviate concerns around FPI outflows even as structural domestic equity flows in India continue to be positive, as evidenced by record-high SIP flows. The growth outlook for India relative to China continues to be robust, driven by a strong investment and real estate cycle supported by low NPAs in the system," the note said.

Even after experiencing a four-month low in foreign fund inflows in August, India is still the largest recipient of FPI flows so far this year among emerging markets. The FPIs were sellers in Thailand, Philippines, Malaysia and Vietnam, according to the Bloomberg data.

Here's What Analysts Have To Say

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services

"Rising bond yields in the U.S. and a strong dollar index are negative for capital flows. This is the primary reason why FPIs have been sellers in the cash market. FPIs have been sellers in most emerging markets in August, mainly due to this double whammy of a rising dollar and rising bond yields. Profit booking in financials also contributed to FPI selling," said VK Vijayakumar, chief investment strategist, Geojit Financial Services Ltd.

"Regarding sector specific investments, FPIs have been consistently buying in capital goods. Recently, they have been buyers in health care, too. The latest jobs report from the U.S. indicates that the U.S. economy is slowing and, therefore, the Fed might not raise rates again. This can bring down U.S. bond yields and the dollar index. If this scenario unfolds, FPIs may again turn buyers into buyers in India," Vijayakumar said.

Shrikant Chouhan, Head of Research (Retail), Kotak Securities

“After a sluggish to negative sentiment last month, foreign investors could be looking at Indian markets with fresh optimism once again, as the nation continues to overcome global economic challenges and perform well on most economic parameters," Shrikant Chouhan, head of research (retail), Kotak Securities, said.

The recent macroeconomic numbers, like strong Q1 GDP growth, robust August GST collections, and upbeat PMI data for last month, should bolster foreign investors confidence in local markets, according to Chouhan.

Sector-Wise Flows

Metals And Mining

Metals and Mining witnesses the largest outflow of $840 million or Rs 6,953 crore in August.

Financial Services

Financial Services saw the second largest outflow at $784 million or Rs 6,734 crore in August. After witnessing inflows for nine consecutive fortnight, financial Services turned seller in August. In July the sector witnesses an inflow of Rs 11,514 crore.

During the month, the Nifty Financial Services fell by 3.59%, according to Bloomberg data.

Fast Moving Consumer Goods

Fast-Moving Consumer Goods sector witnessed the third-largest outflow of $315 million or Rs 2,612 crore in August.

In July there was an inflow at $490 million, or Rs 4,070.40 crore. The Nifty FMCG fell by 2.68%, according to Bloomberg data, in the August.

Power

Power witnesses the largest inflow at $1,398 million or Rs 11,563 crore. In July there was an inflow of $369 million or Rs 3,065.26 crore.

Capital Goods

Capital Goods saw the second largest inflow at $1,007 million or Rs 8,336 crore in August. In July there was an inflow of $685 million or Rs 5,690.25 crore.

Information & Technology

Information and Technology witnessed the fourth largest inflow of $495 million, or Rs 4,088 crore. After witnessing an outflow for 10 consecutive fortnights the sector turned buyer in the second half of July.

In July it witnessed and inflow of $191 million or Rs 1,586.62 crore. During August, the Nifty IT rose by 2.89%, according to Bloomberg data.