After possessing pulled away practically Rs 62,000 crore from domestic stock markets in March this year, foreign investors have been favouring Indian equities for the previous couple of months now. Foreign Institutional Investors (FII) purchased domestic securities worth Rs 60,000 crore in November, their highest ever month-to-month inflows and continue to be net purchasers so far in December. A closer appear at the investment produced by foreign investors this year shows that banks have been their most preferred investment destinations, and regardless of the enormous inflows, the sector’s returns are nevertheless damaging.
FII inflows into the banking sector have been the highest in 2020. Data sourced by ICICI Securities shows that inflows into the sector have been in the variety of Rs 20,000-25,000 crore. However, the returns offered by the sector so far this year have been in the damaging area, down 4%. The second highest inflows had been recorded in the FMCG sector that has offered 11% returns this year, followed by the Oil & Gas sector with third highest inflows but damaging returns. Metals and Telecom sector have been the least favoured sectors, witnessing outflows in 2020. Despite this, returns have been clocked in at 7% and 13%, respectively.
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“FIIs’ favourite sectors remained financials, oil & gas and FMCG where most flows were observed. In the last two years, FIIs have pumped in more than Rs 1 lakh crore each year from which major money flows were seen in the insurance space,” ICICI Securities mentioned. In 2021, the brokerage firm expects inflows to be wholesome for the pharma space, which could aid pharma stocks to outperform, ICICI Securities mentioned.
Since 2012, banks have remained the most well-known investment option for FIIs. “In the last eight years, FIIs favourite sector was banking, financials, oil & gas and capital goods. In the last three years, insurance as a sector got the attention of FIIs and attracted significant flows,” the report mentioned. During the period, the sectoral CAGR of banks has been 18%, oil & gas is at 8%, and NBFC is at 17%. However, in the very same period, the least preferred sectors had been pharma, technologies, and FMCG and their returns have been 17%, 19%, and 15%, respectively.
India has remained one particular of the favourite investment destinations for FIIs amongst emerging markets, excluding China. ICICI Securities mentioned considering that 2012, FIIs have remained net purchasers of domestic equities, pumping in practically Rs 6 lakh crore.