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Foreign investors continue to pump money into India’s insurance sector stocks. Indian equities received a net inflow of ₹54,183 crore in the first three quarters of the current fiscal, with the insurance sector alone receiving close to 50 per cent of this amount.
According to data available with the depositories, FPIs made a net investment of about ₹26,700 crore in the insurance sector during April-December period.
“Insurance companies have seen a lot of buying from FPIs and domestic institutions over the past four to six quarters. Greater visibility in revenues and margins from the current low-base seems to have attracted FPIs to this space,” said Deepak Jasani, Head Retail Research, HDFC Securities.
He also added that multiple offer-for-sale (OFS) transactions from two life insurance companies in CY2019 gave FPIs a greater opportunity to participate in insurance equities.
Financial services sector is the other major gainer of FPI equity inflow in the first three quarters. The sector received around ₹15,000 crore in the nine-month period, of which close to ₹9,000 crore was deployed in bank equities while the remaining went to other financial services including NBFCs, housing finance companies (HFCs), AMCs and other financial services.
Collectively, the BFSI sector received around ₹42,000 crore, or 77 per cent of the total equity inflow from the FPIs in the first three quarters of the current financial year.
In its Q3 preview, Emkay Global Financial Services said, “Corporate banks are likely to report stable to better margins and lower NPAs, mainly due to lumpy NPA resolution including Essar Steel. Most private banks have migrated to the new low-tax rate regime with DTA impact largely factored in for Q2, and these private banks will benefit in Q3 due to lower tax provisions.”
Private lenders
Among private lenders, FPI holding in RBL Bank increased to 24.31 per cent as on December 2019 from 18.79 per cent in March 2019 while their holding in ICICI Bank grew to 45.79 per cent in Q3 from 43.02 per cent in March 2019.
Oil & gas sector was the third-highest gainer of FPI investment with net inflow of a little over ₹8,500 crore during the April-December period.
FPIs reversed their selling spree in software & services sector with a net investment of about ₹4,900 crore in December. However, the sector is still the highest loser of FPI investments with a net outflow of ₹17,400 crore in the first three quarters.
“Software stocks seemed fairly valued on the back of slowing top-line growth and expected squeeze on margins. Levy of tax on buybacks in FY20 Budget also cut the attractiveness of this sector,” said HDFC Securities’ Jasani.
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