Foreign institutional investors turned aggressive buyers on Dalal Street in August with a net inflow of over Rs 51,000 crore during the month. Following the heavy buying by global investors, the benchmark equity index BSE Sensex gained nearly 1,967 points, or 3.41 per cent, to 59,537.07 on August 30, 2022 from 57,570.25 on July 29 last month.
Meanwhile, the majority of FII’s heavy stocks in the BSE 500 index also delivered a positive return to investors in August. With a rally of 45 per cent, BEML emerged as the top gainer in the index. Foreign institutional investors held nearly a 6 per cent stake in the company as of June 30.
JSW Energy (up 43 per cent), Elgi Equipment (up 35 per cent), RBL Bank (up 33 per cent), Adani Power (up 31 per cent), IDFC First Bank (up 31 per cent) and Mahindra Lifespace Developers (up 30 per cent) stood among other major gainers in the index. FIIs held somewhere between 5 per cent and 30 per cent stake in these companies.
Will the ongoing buying by overseas investors continue considering the uncertain economic environment? VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “Foreign portfolio flows are likely to be more country-specific. Rather than allocating more funds to emerging markets, FIIs are likely to allocate more funds to outperformers like India. Therefore, the current trend of overseas investors turning buyers in India is likely to continue, unless there is a continuous surge in the dollar.”
After buying shares worth Rs 4,988.79 crore in July, global investors’ net investment in the domestic equity markets stands at Rs 51,204.42 crore in August. Earlier, they had sold shares worth over Rs 2.50 lakh crore between October 2021 and June 2022.
Sector-wise, private banks (at $116 billion) accounted for 20.1 per cent of the $578 billion market value of FII holdings. It was followed by oil and gas (13.1 per cent of the holdings) with $76 billion, technology (11.7 per cent) with $67 billion. Consumer and automobiles accounted for 7.3 per cent and 5.7 per cent of holdings, respectively. Including NBFCs (10.3 per cent), insurance (1.9 per cent) and PSU banks (1.2 per cent), financials formed 33.6 per cent of FII holdings in India. Cumulatively, these five sectors – BFSI, O&G, IT, consumer and auto– contributed 71.4 per cent to the total FII holdings in India.
Commenting on the further movement of the equity market, Vijayakumar said, “Markets will continue to remain highly volatile in the near term. We don’t know when inflation in the developed markets will come under control. If the ongoing monetary tightening succeeds in containing inflation without pushing the US economy into a recession, that would be a bullish scenario. On the other hand, if the US Fed turns more aggressive in its monetary tightening and if the US economy is pushed into a severe recession in the process, globally markets will turn bearish.”
He further added that investors should respond to these uncertain times with some common-sense investing. History has taught us that it makes sense to remain invested in the market. In these uncertain times, there is safety in high-quality large caps. “We also know that mid and small-caps will outperform in the long run. The best strategy to profit from this is to invest in this segment through mutual fund SIPs,” Vijayakumar said.
The 50-share NSE Nifty index also climbed 601 points, or 3.51 per cent, to 17,759 during the month. The domestic equity markets are closed on August 31 on account of Ganesh Chaturthi.
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities said, “The continuous FII buying has been a major contributor to the current rally. The market will have its keen eye on this trend as any reversal could result in a temporary hiccup.”
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