FPIs turn bullish on financials, autos and IT in first half of August

Mumbai: Overseas investors, known as Foreign Institutional Investors (FIIs), strengthened their bullish stance on sectors like financial services, automobiles, and information technology during the first half of August, according to data from NSDL. The trend marks the fourth consecutive two-week period of increasing inflows, and the strongest two-week buying phase since early February.

In the period from August 1 to 15, FIIs net purchased shares worth ₹16,621 crore across 24 sectors, following more than ₹20,200 crore invested in July. Financial services attracted the highest foreign buying, followed by automobiles and auto components, consumer services, healthcare, and information technology companies. In contrast, telecom, capital goods, power, and real estate experienced the highest outflows.

Out of the 24 sectors monitored, 14 sectors witnessed inflows, while nine sectors saw outflows. Despite the Nifty falling nearly 500 points from its recent highs due to rising bond yields, overall market performance has remained largely flat. This indicates a strategic shift among FIIs, who are now favoring mid-cap names within key sectors, rather than allocating capital to large-cap heavyweights, says Pankaj Pandey, head of fundamental research at ICICI Direct.

Financial services saw a turnaround in buying sentiment this time, with FIIs pouring in ₹6,535 crore. IT stocks also experienced buying for the third consecutive fortnight. Vikas Gupta, CEO at OmniScience Capital, explains that financial services, with clear growth visibility over the next 3-5 years and significant undervaluation, present a compelling option for long-term FPI investments.

However, IT appears to be more of a tactical trading bet due to uncertainties regarding manpower, revenues, and earnings predictability over the long term.

Gupta adds that if FIIs continue to allocate to India, this marks an initial positive trickle indicative of a potential turnaround phase in sentiment towards the country, signaling a non-AI allocation. Pandey also points out that FPI investments have driven the Auto index to new all-time highs, even amidst muted performance from major Original Equipment Manufacturers (OEMs) like Maruti and M&M. Positive inflows in IT hint that the worst of the downturn may be behind it.