Foreign Investor selling intensifies to $ 5.4 bn in first half of March; FIIs selling these sector stocks

Foreign Institutional Investors (FIIs) net sold $ 5.4 billion worth of Indian equities in the first 15 days of March, extending their last five months’ selling spree. The outflows in the first half of March have been most severe since March of 2020, when the covid-19 pandemic stepped outside China and spread across the world. Although Domestic Institutional Investors (DII) have tried to even out things, the severity of outflows has been mammoth. Bank of America Securities (BofA) in a report showed that FIIs have sold stocks from the financial and the discretionary sector the most.

What sectors FIIs are selling

Data showed FIIs sold financials worth $ 2.9 billion and discretionary products worth $ 1.2 billion – the highest outflows seen by the sector since March 2017. FIIs also trimmed their position in the industrial space worth $ 651 million. Analysts at BofA said that outflows from the IT sector were at just $ 80 million, slowing considerably after two consecutive months of heavy outflows of average $ 1.8 billion. On the other hand, FIIs bought healthcare shares worth $ 46 million and energy shares worth $ 74 million.

In terms of sector positioning, foreign investors are most overweight in Energy, Financials, IT, and Discretionaries in the NSE Universe. FIIs are most underweight in materials and industries. Data shows that FII ownership of the NSE 500 index has now slipped to a multi-year low of 19.9%. This is down from 21.4% at the end of October-December quarter in 2020. Although FIIs have recently started turning net buyers, flows still remain far from what they were earlier last year.

DII balance out D-Street

Even as FIIs were fleeing the scene, domestic investors have been pumping in money. “SIP flows remain robust in February 2022 at $ 1.5 billion. Month-to-date retail activity (48% of traded value) has slowed down, ”BofA said. SIP flows have been over Rs 100 billion for six months straight.

Limited upside

BofA, in a recent report, said that risks are skewed to the downside for domestic markets while they predicted limited index level returns from here on. BofA had said that even if geopolitical tensions ease, the Nifty target is set at 17000. Meanwhile, if tensions escalate, the Nifty 50 could tumble down to 14000.

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