Foreign institutional investors (FIIs) abruptly reversed course on Indian financial stocks in the first half of August, purchasing a net ₹6,535 crore after selling ₹2,669 crore in the final fortnight of July. The ₹9,204 crore swing made financial services the focal point of a rapidly shifting sector trade.Total net sectoral inflows surged to ₹16,618 crore during August 1-15 from ₹4,642 crore in the preceding fortnight, according to NSDL data. But the headline acceleration masked a highly selective allocation strategy: financials, automobiles and consumer services attracted a combined ₹14,338 crore, while telecom, capital goods, power and real estate remained firmly on foreign investors’ sell list.“The concentration of flows across these sectors indicates a renewed preference for large, liquid and relatively defensive segments amid evolving market conditions,” Raj Gaikar, equity research analyst at SAMCO Securities, said.133392020Financial services emerged as the biggest beneficiary, accounting for nearly 40% of the net sectoral inflow. SBI Securities said the return of foreign buying suggests that selling pressure on the sector has eased and investors are gradually rebuilding exposure. The brokerage noted that financial services had attracted ₹7,260 crore in June after recording ₹12,303 crore of outflows between March and May.Automobile stocks ranked second, drawing ₹4,405 crore compared with ₹2,372 crore in the previous fortnight. The latest buying, however, has yet to reverse the longer-running retreat as cumulative foreign outflows from the sector over the previous five months stood at ₹35,739 crore, according to SBI Securities.Consumer services received ₹3,398 crore, up from ₹2,840 crore in the second half of July. The sector had already attracted ₹11,370 crore over the preceding two months, indicating that the allocation shift toward consumption-oriented businesses predates the latest fortnight.SBI Securities said the preference for consumer services could reflect a rotation away from cyclical and capital-intensive sectors as investors seek to lower portfolio risk. Relatively steady cash flows, more predictable earnings and resilient consumption trends have strengthened the sector’s defensive appeal, it said.Healthcare and information technology stocks also remained prominent destinations, receiving ₹2,910 crore and ₹2,530 crore, respectively. Consumer durables attracted another ₹1,472 crore, although that was sharply lower than the ₹4,958 crore invested during the previous fortnight.The consumption tilt appeared even stronger when flows were measured against assets under custody. Consumer services recorded inflows equivalent to 1.23% of its previous assets under custody, the highest among sectors. It was the third consecutive period in which consumption-oriented sectors led on that measure, according to SAMCO.Autos followed with an increase equivalent to 0.82% of previous assets under custody, while consumer durables, IT and healthcare recorded increases of 0.74%, 0.64% and 0.55%, respectively.Foreign investors also turned buyers of metals and oil and gas stocks. Metals received ₹720 crore after an outflow of ₹1,056 crore in the preceding fortnight, while oil and gas attracted ₹490 crore following ₹513 crore of selling.The other side of the rotation was most visible in telecommunications. Foreign investors sold a net ₹3,322 crore of telecom shares, slightly exceeding the ₹3,271 crore outflow in the previous fortnight. Telecom has recorded ₹24,530 crore of foreign selling since January, according to SBI Securities.The brokerage cited continuing expenditure on 5G networks and spectrum, pressure on balance sheets and the overhang from adjusted gross revenue dues as factors potentially constraining foreign investor appetite for telecom stocks.Capital goods recorded the second-largest outflow at ₹1,556 crore, although selling eased from ₹3,618 crore in the previous fortnight. Power companies saw an outflow of ₹1,164 crore, followed by real estate at ₹1,014 crore and construction at ₹404 crore.Power and other capital-intensive businesses face long investment cycles, execution risks and uncertainty around project costs, SBI Securities said. Such concerns contrast with the liquidity, earnings visibility and defensive characteristics investors are seeking elsewhere.Gaikar described the pattern as “a notable rotation away from telecom and capital-intensive sectors” toward financials, automobiles, consumer-facing businesses and healthcare.(Data: Ritesh Presswala)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
