FPIs raise the ante by driving up allocation to oil & gas, auto stocks

Foreign portfolio investors (FPIs) have increased their allocation to the automotive (auto) sector by 37 basis points (bps) month-on-month to 5.6 per cent in June - the highest level since March 2019.

Last week, the S&P BSE Auto Index made fresh lifetime highs - the first among BSE’s 19 sectoral indices to make a new record in recent months. Easing commodity prices, supply-chain issues, and a cut in fuel prices have elevated sentiment towards auto stocks.  

In a recent note, Morgan Stanley has said the auto industry looks ‘attractive’ as it has the right drivers in place to outperform the market. Besides auto, FPIs increased their allocations to the oil and gas sector by 44 bps and the power sector by 21 bps, according to an analysis by IIFL Alternative Research.

But it slashed its exposure to the financial sector by 50 bps to 31 per cent and in metals and mining stocks by 26 bps. Meanwhile, FPI allocation to the information technology sector is down to 12.4 per cent, from a peak of 15.6 per cent in December 2021.