Indian shares have rallied recently led by upbeat investor sentiment as businesses opened up and economic activities restarted after more than a two-month-long stringent nationwide lockdown due to coronavirus. The equity rally was also largely fuelled by inflows of foreign capital into domestic shares, analysts said.
The foreign institutional investors (FII) and foreign portfolio investors (FPI) have pumped in Rs 18,239 crore in the Indian financial markets, including equity and debt markets, so far in June, as per the data available on National Securities Depository Limited (NSDL). The FIIs remained net sellers in May, pulling out Rs 7,356 crore during the month. The trend reversed towards month-end with FIIs pouring more liquidity into Indian markets due to the balancing of portfolios to adjust for the new MSCI index.
“The foreign investors are betting on the Indian market as they believe the country’s economic growth to pick up in the upcoming 6-9 months. Strong foreign capital inflows are seen in telecom and pharma stocks as well as beaten-down banking stocks. FIIs and FPIs are looking at stocks with attractive valuations and believe that the Indian market is no more a bear market,” said Vinod Sharma, Head—Private Client Group & Capital Market Strategy, HDFC Securities.
Sectorally, financials have had a dominant run in the last few years with FIIs being majorly overweight on the Banking and Financial Services (BFSI) sector with 39.8 percent weightage. BFSI is followed by Technology at 12.2 percent weight. Thus, BFSI along with Technology accounts for more than 50 percent of FII allocation if the Nifty-500 is used as the benchmark.
According to a report by brokerage Motilal Oswal, on QoQ basis, FIIs have increased weight in Consumer, Technology, Healthcare, Telecom and Retail. While, Private Banks, NBFCs, Autos, and Metals have seen a reduction.
In terms of absolute holdings, out of a total FII holding of $310 billion, Private Banks is at the top with $72 billion investment value.
FIIs reduced stake in 90 percent of Nifty-50 companies on a QoQ basis, while DIIs increased stake in 78 percent of Nifty-50 companies, the report noted.
Among stocks, Bharti Airtel and Zee Entertainment have witnessed an increase in FII holding on QoQ basis. Eicher, Axis Bank, Tata Steel, ICICI Bank and Grasim were the top stocks to see the decline in FII holding, it said.
There is an excess of global liquidity after the central banks across countries pumped in cash into the markets by way of slashing interest rates and unleashing stimulus packages to counter the economic fallout of the coronavirus pandemic. This liquidity has come into Indian markets, driving the recent rally into the stocks, analysts said.
First Published: Jun 9, 2020 5:59 PM IST
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