Which sectors are on FPIs' radar as they return to India?

Foreign investors have accelerated buying of domestic shares recently. They picked up nearly Rs 5,000 crore worth of equities in July, breaking their selling spree of nine months. 

Analysts, however, remain cautious about the trend as the global backdrop of rising inflation, and interest rates remain unchanged.

Vineet Bagri, Managing Partner, TrustPlutus Wealth India says, FIIs have only now begun to moderate their selling. Elevated dollar index indicative of outflows, not inflows. 

As per data compiled by YES Securities, IT, metals and financials were the top pockets that were dumped by FIIs between April-June this fiscal.

On the other hand, oil & gas, FMCG, automobile and capital goods saw increased interest with upped stakes during this period. 

Moreover, during the first two weeks of July, some additional sectors bought by FIIs included construction, healthcare, media and entertainment and power, according to NSDL data. 

Overall, analysts are particularly bullish on IT and banks, among others.

Talking to Business Standard, Nitin Raheja, Executive Director, Head - Discretionary Equities, Julius Baer Wealth Advisors, said FPIs have typically been overweight on financial services. Valuation concerns, policy tightening prompted FIIs to trim stake. IT, banks gaining strength as FIIs turn net buyers. Moderation in FPI outflows set to augur well for the duo. 

VK Vijayakumar of Geojit Financial Services, meanwhile, is upbeat on the auto and capital goods sectors. 

According to the analyst, “Easing chip shortage crisis, and robust demand will aid the auto segment, particularly passenger and commercial vehicles, while impressive credit growth and green shoots of capital expenditure lend support to capital goods”.
 

Apart from foreign fund flows, stock-specific action will continue to sway the markets today. Vodafone Idea, IndiGo, Lupin, Adani Power and Gujarat Gas are among key stocks that will be on investors’ radar ahead of their Q1 earnings. Besides, the monetary policy meeting of the RBI will also begin today.