In the past month, financials and industrials have borne the brunt of the ongoing risk-aversion trade prompted by Foreign Portfolio Investor (FPI) selling, with indications pointing towards a continuation of this trend. Foreign investors’ over-ownership in financials, coupled with substantial momentum in power and construction sectors due to economic recovery, has led to significant Foreign Institutional Investor (FII) selling.
HSBC Global Research’s report highlights that since the beginning of September 2023, India has witnessed FII outflows amounting to $3.1 billion. Recent data from the National Securities Depository Limited (NSDL) indicates FII outflows of Rs 3,549 crore from financial stocks between September 15 and September 30, and Rs 1,231 crore between October 1 and October 15.
Margin pressure concerns, combined with FIIs being overweight in the banking sector, have led to substantial FII selling in bank stocks. As of June, FII ownership in banks reached 25.7 percent, a 6 percent surplus compared to the MSCI India index.
Additionally, FII ownership in Non-Banking Financial Companies (NBFCs) and other sectors stood at 8 percent, 0.8 percent higher than banks’ weightage in MSCI India. Andrew Holland, Managing Director, and Head of Research at Avendus Capital, noted, “Banks’ management has not expressed optimism regarding when margin pressures will ease, providing another reason for FIIs to exit these stocks at present