Overseas investors remained net buyers in Indian equities for the fifth straight month, helping benchmark indices scale new records after Budget 2021.
Foreign portfolio investors deployed $3.56 billion in February, according to data from Edelweiss Alternate Research.
Foreign inflows took Indian equities to record highs and the benchmarks saw their best budget-day gain after 1997. S&P BSE Sensex and NSE Nifty 50 jumped more than 6% in February, the best for the month in at least two decades.
Banking, oil & gas and insurance sectors received bulk of the inflows during the month. Nearly 55% of the total $3.56 billion invested by FPIs went to the banking sector, according to the Edelweiss note. "FPIs deployed $1.96 billion in banking and financials. The sector is now 34.8% of FPI AUM as compared to 33.8% in January 2021."
The Nifty Bank index rose nearly 14% in February with majority of the gains seen in State Bank of India (up 38%), IDFC First Bank (up 34.4%) and IndusInd Bank (up 25.6%). "With robust FPI flows and ensuing liquidity, we expect the sector to continue to garner FPI interest in March as well," Edelweiss said.
Oil & gas saw $676-million inflows, the highest in a month since March 2019, according to the Edelweiss note. "The FPI weightage in AUM now stands at 11.3% as compared to 10.7% in January 2021."
The BSE Oil & Gas index rose 12.5% during the month, with Gujarat State Petronet Ltd. (up 26%), Oil and Natural Gas Corp. (up 25.7%) and Bharat Petroleum Corp. (up 17.2%) emerging as the top three gainers. Reliance Industries Ltd., too, gained 13% during the month.
The other sectors which saw inflows were Insurance ($244 million), telecom ($243 million) and metals & mining ($205 million). These five sectors, according to Edelweiss, garnered 90% of the total inflows for the month.
Buying was also seen in sectors like cement, power, logistics, capital goods and media.
Among the sectors where foreign investors chose to book profits were I.T., which saw outflows of $321 million. The FMCG sector witnessed outflows as well. "FPIs, after pumping in $2.9 billion from October 2020 to January 2021 (in FMCG), booked profits by selling worth $96 million," Edelweiss said.
Auto index, despite posting monthly gains, saw outflows from FPIs. "All the three sectors have run up a lot from March lows and it looks like FPIs booked profits in 'expensive in terms of valuations' sectors."
