FIIs Turn Bullish on Financial Services Segment; Invest Rs 8,100 Crore in Late June

Foreign Institutional Investors (FIIs) have shown a significant shift in their investment strategy, turning bullish on the financial services sector by purchasing shares worth Rs 8,100 crore in the latter half of June. This follows an investment of approximately Rs 1,000 crore in the same sector during the first half of the month.

Historical Context

Historically, FIIs have played a crucial role in the Indian stock market, often influencing market trends and investor sentiment. In May, FIIs were net sellers in the financial services sector, offloading shares worth Rs 8,583 crore. This recent turnaround in June is noteworthy, especially given the sector’s previous underperformance.

Reasons for the Turnaround

Market analysts attribute this renewed interest to several factors:

1. Upgrades by Broking Firms: Various broking firms have upgraded their outlook for the financial services sector, particularly private-sector banks.
2. Strong Rally: June witnessed a robust rally in financial services stocks, driven by positive sentiment and strong performance metrics.
3. Analyst Recommendations: Bernstein analysts highlighted strong credit growth, asset quality, and margins in Indian banks. Similarly, CLSA and Bank of America Securities have given ‘buy’ ratings to major banks like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank.

Future Outlook

Analysts expect these banks to outperform in Q1FY25, citing robust margins and credit flow. Macquarie projects healthy Return on Assets (ROAs) and Return on Equity (ROEs), while Nomura points out challenges in deposit growth but expects stabilization through increased government credit or RBI forex purchases.

Broader Market Trends

Apart from financial stocks, FIIs also invested heavily in other sectors in late June:

• Telecom: Rs 6,200 crore
• Consumer Services: Rs 3,100 crore
• Capital Goods: Rs 2,900 crore
• Healthcare: Rs 2,886 crore
• Auto: Rs 2,050 crore
• IT: Rs 1,578 crore
• Construction: Rs 1,475 crore
• Oil & Gas, Consumer Durables, Chemicals: Over Rs 1,000 crore each

Conversely, FIIs were net sellers in power, metals, and FMCG stocks, continuing the trend from May.

Summary

• FIIs Investment: Rs 8,100 crore in financial services in late June.
• Historical Context: Shift from net sellers in May to aggressive buyers in June.
• Reasons for Turnaround: Upgrades by broking firms, strong rally, and positive analyst recommendations.
• Future Outlook: Expected outperformance in Q1FY25, robust margins, and credit flow.
• Broader Market Trends: Significant investments in telecom, consumer services, capital goods, healthcare, auto, IT, construction, oil & gas, consumer durables, and chemicals.
• Net Sellers: Power, metals, and FMCG sectors.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Always consult certified experts before making investment decisions.