Financials, information technology (IT) and fast-moving consumer goods (FMCG) stocks accounted for most of the sell-off by foreign portfolio investors (FPIs) during the first fortnight of October, a report by Business Standard stated.
Overseas funds dumped ₹4,081 crore shares of financial services sector firms, while IT shares of ₹1,665 crore were sold, the report informed. Meanwhile, the FPIs sold FMCG stocks worth ₹1,188 crore, it added.
Despite the major sell-off by foreign investors in the first half of October, FPIs have the highest sectoral allocation to financial stocks at 32.12 percent, BS pointed out.
Analysts said that the rise in inflation and yields is negative for finance companies as they have to keep higher provisions for their mark-to-market bonds, which could eat into their profits.
IT stocks comprise 10 percent of the assets under consideration (AUC) of foreign investors as on October 15, it further noted. However, analysts said the selling in IT stocks has bottomed out and there might be value buying in the next fortnight.
During the first half of October, FPIs bought shares of construction companies ( ₹565 crore), power stocks ( ₹323 crore), and capital goods stocks ( ₹309 crore), said the report.
Analysts told BS that the buying of power stocks and selling in FMCG signifies the tilt towards beta stocks at the cost of defensives.
The shift in favour of beta stocks picked up towards the end of last fortnight and is likely to gather momentum going forward, added the analysts.
Foreign investors have pulled out close to ₹5,500 crore from the Indian equity markets so far this month in the wake of strength in the US dollar against the rupee.
With this, the total outflow by Foreign Portfolio Investors (FPIs) has reached ₹1.74 lakh crore so far in 2022, data with the depositories showed.
Going forward, FPIs' flow is expected to remain volatile in the coming months due to ongoing geopolitical risk, elevated inflation, expectation of rising treasury yields, etc, Shrikant Chouhan, Head-Equity Research (Retail) at Kotak Securities, said.