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Foreign fund outflows from the banking and financial sector stocks continued unabated in December. After pulling out close to ₹30,000 crore in the first eight months, foreign investors have pulled out nearly ₹7,000 crore more in the first 15 days of December.
FPI sell-off
According to latest depositories data, foreign portfolio investors (FPIs) sold off equities worth ₹6,860 crore from the financial services sector between December 1 and 15 including ₹3,916 crore from banking sector and ₹2,944 crore from ‘other financial services’ sector.
FPIs have been net sellers in the financial services sector since the beginning of the current fiscal selling stocks worth ₹29,136 crore between April and November. Over 96 per cent of the total outflow or ₹28,057 crore went out from the banking stocks while the remaining ₹1,078 crore was from the other financial services which includes stocks of financial institutions, non-banking financial companies and housing finance companies.
‘General trend’
Market experts say the current FPI sell-off in the banking and financial sector is part of their overall outflow from the Indian equities and not on account of any fundamental risk in the underlying stocks in these sectors.
“Global uncertainty on account of Omicron, tightening of monetary policy by some central banks and rich valuation of Indian markets vs other emerging markets have all come together as a reason for continued FPI selling. Banking sector has major FPI holdings, so it is bearing the burnt,” said Piyush Nagda Research Analyst at Prabhudas Lilladher.
FPIs have been traditionally overweight in the financial services sector. Even after the outflow between April 1 and December 15, FPI assets in the financial services sector constituted over 30 per cent of their total equity assets of ₹48.61-lakh crore as of December 15.
On an overall basis, too, FPIs remain net sellers of Indian equities in the current fiscal. Concerns over high valuations of Indian stocks, interest rate hikes in the global markets and the emergence of a new Covid variant are cited to be reasons for this sell-off.
‘Long China, short India’
FPIs have been net sellers of Indian equities to the tune of ₹28,339 crore, year-to-date in the current fiscal.
This is against a record inflow of ₹2.74-lakh crore in the previous fiscal.
“In recent times, while other emerging markets were falling, India continued to outperform to such an extent that our weight in the MSCI Emerging Market Index moved from 8 per cent to 12 per cent. This prompted some foreign portfolio investors to book profits,” Kotak Mahindra Asset Management said in its outlook for 2022.
“FPIs are sellers in the Indian market. This is primarily driven by the ‘long China, short India’ call, because we have outperformed China by a big margin,” it added.
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