The top three sectors which saw maximum outflow by FIIs in April were banking and financial ($1.12 billion), oil & gas ($466 million) and metals and mining ($ 242 million), according to NSDL data
Foreign institutional investors (FIIs) turned net sellers of Indian shares for the first time in six months in April amid concerns that the deadly second wave of covid-19 and localized lockdowns will derail the country’s economic recovery.
The sectors that saw the maximum outflow by FIIs in April were banking and financial ($1.12 billion), oil and gas ($466 million) and metals and mining ($242 million), according to NSDL data analysed by Edelweiss Alternative Research.
“While the current sectoral weightage in banking and finance now stands at a six-month low at 32.7%. The weightage in oil & gas is at 11.3% and metals and mining is at 2.4%," said Abilash Pagaria, analyst, Edelweiss Alternative Research.
However, the sell-off by FIIs didn’t impact the sectoral performance during the month, clearly indicating that they received liquidity from domestic institutional investors. For instance, the BSE Bankex index was down around 1% in April, but BSE Metals gained 24%, making it the best sectoral gainer during the month.
Despite the pandemic stress, metal stocks have been rising as industrial metal prices hit multi-year highs. The BSE Oil & Gas index also gained more than 1% in April.
Other sectors that were dumped by FIIs in April were auto ($143 million), logistics ($64 million), pharma ($60 million), cement and construction ($45 million) and capital goods ($31 million).
Overall, FIIs sold shares worth $1.5 billion in April, after pumping an aggregate of $26.88 billion in the previous six months.
Meanwhile, two sectors that continued to receive high levels of FII inflows during March and April were FMCG (fast-moving consumer goods) and realty.
FMCG stocks saw FII inflows of $244 million in April and $516 million in March. Real estate stocks received FII money worth $213 million in April following a $710 million inflow in the previous month. However, the BSE FMCG index was down about 3%, while the BSE Realty lost 8% in April.
While overall Indian markets have stayed resilient despite the unprecedented covid cases in the country and medical calamity, FIIs have continued to wind up positions in equities even in May so far.
Though analysts feel that companies are better prepared to meet business disruptions caused by the lockdowns compared to last year, they are pinning their hopes on the ongoing vaccination drive and a sustained recovery in earnings.
“Resurgence of the second covid wave has muddied sentiments and impaired FY22 earnings visibility. While the market is currently looking beyond the short-term impact, if the pandemic doesn’t subside soon, it opens up downside risks," said Motilal Oswal Institutional Equities.
“Q4FY21 earnings are progressing largely in line with our expectations, but earnings downgrades are now rising, given the widespread restrictions in various states, which is hurting mobility and economic recovery. The interplay of resurgence in covid-19 cases and the pace of vaccination would decide the trajectory of economic recovery going forward," it added.
Pagaria at Edelweiss said FII flows in May will depend upon the countrywide restrictions, business activities, ensuing Q4FY21 result season and management commentary for the coming months.
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