Realty, insurance corner bulk of FPI flows at $500 mn each in March
Banks, IT see outflows amid valuation concerns
Samie Modak |
Companies in the real estate and insurance sector cornered the bulk of the foreign portfolio investor (FPI) flows—half a billion dollars each—in March. The oil & gas sector too reported strong inflows of close to $460 million.
Analysts believe the spike in flows in the real estate sector is a case of foreign funds taking a bullish view on select stocks and not the entire sector.
“This is the first time FPIs deployed a sizable amount in the real estate sector,” said Abhilash Pagaria, an analyst with Edelweiss Alternative Research. “Although in March, NSE Realty index fell 4.5 per cent, the outliers were Oberoi Realty (up 5.5 per cent) and Prestige (up 2.5 per cent).”
Meanwhile, the inflows in the insurance and oil & gas sectors was on account of large block trades and index rebalancing.
“Block deals in SBI Life and BPCL in March saw healthy FPI participation. Also, part of the FPI inflows into the oil & gas sector can be also attributed to Reliance’s partly-paid up shares inclusion in the FTSE India index,” explained Sriram Velayudhan, VP, Alternative Research, IIFL Securities.
Banking and financial stocks—which typically get the highest share of foreign inflows—saw a minor pullback from FPIs at $121 million. The information technology (IT) sector saw the highest redemption at $329 million.
The outflows from these two sectors come amid a spike in valuations.
According to a note by Motilal Oswal, the IT sector currently trades at a price-to-earnings multiple of nearly 24 times– a 40 per cent premium to its historical average of 17.1 times. The private banking pack trades at a price-to-book ratio of nearly three times—a 17 per cent premium to its historical average of 2.4 times.
Outflows from these two sectors—which have the biggest weightage in the benchmark Sensex and the Nifty indices—resulted in overall subdued performance for the Indian market. The Sensex gained just 0.8 per cent last month—making India one of the worst-performing major markets globally.
The Nifty Bank index fell 4.5 per cent in March with IndusInd Bank (down 10 per cent), State Bank of India (6 per cent) and Axis Bank (4 per cent) witnessing sharp losses.
As a result, FPI’s sectoral weight in banking fell to 33.4 per cent vs 34.8 per cent in February.
FPIs had invested $1.44 billion in March—much lower than what they had invested in January ($2.66 billion) and March ($3.5 billion). The deceleration in foreign flows into India was on account of rising bond yields in the US.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.