Second on their selling list was oil and gas stocks worth about Rs 21,444 crore, followed by Rs 11,582 crore sell-off in FMCG and another Rs 10,440 crore outflow recorded in the auto sector, shows NSDL data.
On a net basis, FIIs sold Rs 94,017 crore from Dalal Street in the month as against a buying of Rs 57,723 in September. Selling was recorded from most other sectors like consumer services, IT, consumer durables, power, realty, telecom and capital goods.
In the calendar year 2024 so far, financial services sector has seen the largest outflow ($7.65 billion) followed by the energy sector ($3.8 billion).In the last one year, financials have underperformed with Nifty Bank rising only about 19% against nearly 25% rise seen in Nifty50.
The FII sell-off, which began with ‘Buy China, Sell India’ trade as a series of stimulus measures from China made foreign investors rethink their strategy in emerging markets, sluggish corporate results in Q2 only made matters worse.
“With a stronger-than-expected growth outlook for the U.S., markets are recalibrating their expectations for the pace and magnitude of rate cuts. This shift has contributed to rising yields and a firming dollar index, adding further pressure on capital flows as emerging market currencies come under strain,” points out fund manager ArunaGiri N of TrustLine Holdings.
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Brokerages say almost half of NSE100 companies that have released their September quarter results have missed expectations by over 4%.
“Thanks to an elongated period of strong growth, most participants from policymakers to investors are still considering the slowing signs an anomaly. Once reality hits, we expect a further but limited moderation in the Nifty from current levels,” Bernstein said in its strategy report.
Motilal Oswal’s analysis of 34 Nifty companies that have reported results so far shows that profit has been flat on a year-on-year (YoY) basis against the expectation of 2% growth.
As far as private banks are concerned the earnings growth was mixed, while PSU banks reported a healthy earnings trajectory. Margins witnessed compression for both, with a few reporting double-digit NIM compression on a sequential basis, Motilal Oswal said.
For NBFCs, Q2 was a weak quarter in terms of asset quality, where the stress was compounded by extended monsoons, unseasonal rainfall in Sep-Oct and floods across certain states in the country.
Jitendra Gohil, Chief Investment Strategist, Kotak Alternate Asset Managers, said the outlook for private banks and NBFCs is mixed, and valuations are relatively comfortable.
“Microfinance and unsecured loan-focused businesses have experienced deteriorating fundamentals. We advise avoiding such banks and NBFCs, despite the correction. Well-managed banks with granular deposit and loan bases may outperform. The RBI may cut rates and ease liquidity conditions in the next 3 to 6 months, providing potential tailwinds,” he said.
Other domestic investors are, however, bullish. Tata Mutual said with US elections out of the way and the recent 6-8% fall from the recent highs, it makes a case for adding exposure to equity markets.
Domestic brokerage firm Emkay Global has raised weight on financials where it sees a tactical trade – easier liquidity without rate cuts is a sweet spot.
Dalal Street veteran Sunil Subramaniam expects FII volatility to continue till the end of the year but says domestic fund managers are now ready to buy underperformers like banks and financial stocks.
“Domestic fund managers are sensing an opportunity and from now on even if there is further FII selling, domestic fund managers will step in,” he said.
Also read | Trump trade going wrong? 6 reasons why Sensex, Nifty aren’t joining Wall Street party
(Data: Ritesh Presswala)
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