FPIs lap up financial, oil & gas stocks again

After betting on cyclical and defensive sectors such as automobile, capital goods and telecom in January, foreign portfolio investors (FPIs) have again turned their focus to Financials and Oil & Gas sectors in February.

These two sectors alone garnered 73 per cent of ₹25,788 crore that the FPIs pumped into Indian equities in February.

Sector-wise analysis of FPI inflows in the equity segment shows that the ‘Financial Services’ sector alone received a net inflow of ₹14,266 crore in February, of which ₹6,197 crore went to ‘Banks’, The remaining went to ‘Other Financial Services’ segment that spans financial institutions (FIs), NBFCs and housing finance companies (HFCs), among others.

In its Foreign Sectoral Flow Insight for March-21, Edelweiss Alternative Research said, “After the ‘pro-growth’ Union Budget on February 1, in line with our expectations, FPIs once again became net buyers in Banking & Financials as they deployed $1.96 billion, which is almost 55 per cent of the $3.56 billion (Total inflow). The sector is now 34.8 per cent of FPI AUM vs 33.8 per cent in Jan-21.”

Changing preferences

Amid signs of a V-shaped economic recovery after the pandemic, foreign investors turned their focus on cyclical and economy-oriented sectors such as capital goods, automobile and auto components and metals and mining over the last three months.

For instance, the ‘Capital Goods’ sector witnessed a net inflow of ₹10,869 crore during November 2020 and January 2021 as opposed to an inflow of just ₹2,700 crore between April and October. Similarly, the ‘Metals & Mining’ sector got ₹7,009 crore of net investment between November and January against net outflow of ₹1,953 crore in the first seven months of FY21.

While FPIs pulled out ₹3,908 crore in January, they have increased their weightage in the sector again in February.

Top gainers

“With robust FPI flows and ensuing liquidity, we expect the sector to continue to garner FPI interest in March as well,” the Edelweiss report noted.

FPIs have pumped in record investment of ₹2.64-lakh crore into Indian equities between April 2020 and February 2021. Of the total inflow, 30 per cent or ₹78,075 crore went to the financial services sector.

‘Oil & Gas’ was the other major gainer in the equity segment with a net inflow of ₹4,467 crore in February. “The next sector which attracted FPIs was Oil & Gas as they parked $676 million which is the highest monthly flows since March 2019. This is almost 20 per cent of the total inflows. The FPI weightage in AUM now stands at 11.3 per cent vs 10.7 per cent on January 21,” the Edelweiss report said.

Insurance (₹1,782 crore), Retailing (₹1,838 crore) and Telecom services (₹1,777 crore) were the other major beneficiaries in February, while Software & Services (₹2,333 crore) and Food, Beverages & Tobacco (₹2,317 crore) witnessed net outflow during the month.