PremiumMUMBAI: : As foreign institutional investors (FIIs) went on a selling spree of Indian equities in April, shares of banking and financial institutions, oil & gas, and metals & mining stocks were dumped the most. As escalating covid cases in India and localised lockdowns threatened to derail economic recovery, FIIs had turned net sellers of Indian shares in April for the first time in six months.
The top three sectors which saw maximum outflow by FIIs in April were banking and financial ($1.12 billion), oil & gas ($466 million) and metals and mining ($ 242 million), according to NSDL data analysed by Edelweiss Alternative Research.
“While the current sectoral weightage in banking and finance now stands at six-month low at 32.7%. The weightage in oil & gas is at 11.3% and metals and mining is at 2.4%," Abilash Pagaria, analyst, Edelweiss Alternative Research said.
However, the sell-off by FIIs didn’t impact the sectoral performance in the month clearly indicating that they received liquidity by domestic institutional investors. For instance, BSE Bankex was down around 1% in April, but BSE Metals had gained 24%, best sectoral gainer in the month. Despite the pandemic stress metal stocks have been rising as industrial metal prices hit multi-year highs. BSE Oil & Gas index was also up over 1% in April.
Other sectors which were dumped by FIIs in April were auto ($143 million), logistics ($64 million), pharma ($60 million), cement and construction ($45 million) and capital goods ($31 million). FIIs had sold shares worth 1.5 billion in April, after pumping an aggregate of $26.88 billion in previous six months.
The two sectors which continued to see highest FII net inflow consecutively for the two months were –FMCG and realty. FMCG stocks saw FII inflows of $244 million in April and $516 million in March. Real estate stocks received FII money worth $213 million in April following a $710 million inflow in the previous month. Surprisingly, BSE FMCG was down about 3% and BSE Realty lost 8% in April.
While overall Indian markets have stayed resilient despite the unprecedented covid cases in the country and medical calamity, FIIs have continued to wind up positions in equities even in May so far. Though analysts feel that the companies are better prepared to meet the disruptions in business due to localised lockdowns than last year, they are pinning their hopes on vaccination drive and earnings recovery momentum to sustain.
“Resurgence of the second covid wave has muddied sentiments and impaired FY22 earnings visibility. While the market is currently looking beyond the short-term impact, if the pandemic doesn’t subside soon, it opens up downside risks. Q4FY21 earnings are progressing largely in line with our expectations, but earnings downgrades are now rising, given the widespread restrictions in various states, which is hurting mobility and economic recovery. The interplay of resurgence in COVID-19 cases and the pace of vaccination would decide the trajectory of economic recovery going forward," said Motilal Oswal Institutional Equities.
Pagaria also agrees. He also feels that the FII flows in May will depend upon the countrywide restrictions, business activities, ensuing Q4FY21 result season and management commentary for coming months.
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