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Domestic push: Retail investors fill FPI vacuum; metal, IT stocks in demand
Mumbai, Dec 2 - Foreign funds' continuous flight from Indian equities has led domestic institutions along with retail investors to go in for a buying spree across sectors.
Accordingly, the outflow of foreign funds have made valuations of many "quality stocks" attractive again.
Taking advantage of the trend, DIIs have pumped in funds worth Rs 40,000 crore since October.
On Thursday, they pumped in Rs 1,372.6 crore, whereas the FPIs sold equities worth Rs 909.71 crore.
Notably, FPIs have sold more than Rs 68,000 crore till now from October.
As per analysts, institutions seem to be on a buying spree for IT, Banks, Capital Goods, and FMCG stocks.
Besides, some fund inflows have been witnessed in the two-wheeler and power sectors' stocks.
"Global worries on account of rate hikes and the new Covid variant are some reasons apart from calendar year end that is pushing them to be aggressive on the sell side," said Deepak Jasani, Head of Retail Research at HDFC Securities.
"Institutions seem to be lately buying IT, Banks, Capital Goods, and FMCG stocks apart from some individual stocks."
According to Gaurav Garg, Head of Research at CapitalVia Global Research: "Depreciation in Rupee has put a dent on overall sentiments of institutions, especially from foreign end."
"One of the other reasons as FPIs have slashed their funds in emerging markets ahead of bond tapering which is expected in a few quarters as the US Fed has indicated in its last meeting as well on higher inflation and rich equity valuation."
Furthermore, Ankit Pareek, Research Analyst at Choice Broking cited that so far FIIs have remained net sellers in last eight months (FY22) with a total net outflows of around Rs 1.1 lakh crore, while the major outflows took place mainly in the past two months.
"In this year, the domestic market was mainly driven by the DIIs inflows and rising retail investors' participation in the equity market," Pareek said.
"US Fed's bond taper plan, fear of rapid rate hike, rising commodity prices and inflation have weighed on market sentiments which have turned into FII net sellers in Indian markets. Strong growth recovery in the economy has improved investor sentiments which have resulted in outperformance of domestic benchmarks against other emerging markets."
Additionally, V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services said: "An important takeaway from FPI selling is that their selling is not having the impact on markets as they used to have in the past."
"The 'new money' of newbie retail investors is now more market trend determining than the 'smart money' of FPIs."
In addition, Vijayakumar pointed out that sustained FPI selling in banks has led to the underperformance of banking in the current bull phase.
"Banking stocks constitute the largest holding of FPIs. FPIs have been selling banks not because of any problems in the banking sector but because banks constitute their largest holding."
"Therefore, if the FPI selling subsides, top quality bank stocks may rebound since their fundamentals are strong and valuations are reasonable."
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