After selling Indian equities for the first two months of this calendar year, foreign institutional investors or FIIs turned net buyers in March by investing close to $1 billion (Rs 7,936 crore) ahead of the beginning of the Q4 earnings season.
On top of FII shopping list last month was services (Rs 7,246 crore), power (Rs 3,214 crore), metals and mining (Rs 2,938 crore), auto (Rs 2,695 crore), capital goods (Rs 2,507 crore) and construction (Rs 2,224 crore).
If FII flow is an indication, IT companies may disappoint in March quarter as foreign investors sold IT stocks worth Rs 6,910 last month. Dollars also flowed out of oil and gas and healthcare stocks.
Financial services, which are expected to report healthy earnings growth in the March quarter, also saw an outflow of Rs 556 crore.
FIIs have been net sellers of Indian equities for two consecutive financial years for the first time. NSDL data shows they were net sellers to the tune of Rs 1.22 lakh crore in FY22 and Rs 41,000 crore in FY23.
"This is likely to reverse in FY24 since India has the best growth potential in FY24. Even though Indian valuations are relatively expensive, they have turned reasonable now and in tune with the long-term premium enjoyed by India," said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
What should investors do?
As the Q4 earnings season begins, Dalal Street expects BFSI and auto companies to lead the charge while metals and oil and gas stocks may drag.
In the case of IT services, Kotak Institutional Equities expects growth to be impacted due to the usual seasonality in March quarter, slowdown in discretionary spends and demand deterioration. Jefferies has warned that the aggregate revenues of software majors are likely to moderate sharply to 0.6% on-quarter in constant currency terms with Coforge and LTIMindtree leading on growth.
Domestic brokerage firm Motilal Oswal has maintained its overweight stance on financials, capex and autos and upgraded consumption to overweight. "We are Neutral on IT and Healthcare while we retain our underweight stance on metals, energy and utilities even as we reduce our underweight view on energy," Motilal said.
It has maintained a neutral stance on IT with the entire weight being allocated to large-caps: Infosys, TCS and HCL Tech.
Axis Securities has taken an overweight stance on auto, BFSI, speciality chemicals and telecom. "We believe with the asset quality pain being largely behind (barring certain segments) and the restructured book behaving fairly well, a ramp-up in credit growth and the ability to maintain margins in an increasing interest rate environment is likely to drive valuations for Banks/NBFCs moving forward," it said.
(With data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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Certainly! The article you've shared delves into the dynamics of foreign institutional investments in Indian equities, emphasizing their shift in investment patterns across various sectors. As an enthusiast in finance and market analysis, I've closely followed such trends and can break down the concepts involved:
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Foreign Institutional Investors (FIIs): These are entities like mutual funds, pension funds, hedge funds, etc., investing in financial markets of countries other than their own.
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Equity Markets: The focus here is on Indian equity markets, where FIIs are observed to have turned net buyers after selling in the initial months of the year. This shift in their behavior indicates changing market sentiments and investment strategies.
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Sectoral Investments: The article specifies where FIIs have directed their investments. Sectors like services, power, metals and mining, auto, capital goods, and construction attracted significant FII funds, while IT, oil and gas, healthcare, and financial services witnessed outflows.
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Q4 Earnings Season: The anticipation surrounding Q4 earnings season reflects market expectations for different sectors. There's speculation about the performance of sectors like BFSI (Banking, Financial Services, and Insurance), auto, IT, and metals during this period.
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Analysts' Recommendations: Various financial institutions and brokerage firms have provided insights and recommendations based on their analyses. They suggest overweight or underweight stances on specific sectors, such as autos, BFSI, IT, metals, etc. These stances are often backed by detailed market assessments and growth projections.
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Market Trends and Predictions: Analysts provide their views on potential market movements, considering factors like seasonality, demand shifts, growth projections, and macroeconomic indicators.
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Investment Strategies: Recommendations often include specific stocks or segments to consider for investment, aligning with the projected performance of various sectors.
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Market News Platforms: The article mentions the sources of data and information used, such as ETMarkets, which offer real-time updates, stock tips, and expert advice for investors.
In summary, the article navigates through the nuances of FII behavior, sectoral preferences, market predictions, and expert recommendations, offering insights valuable to investors seeking guidance amid evolving market conditions.
