NSDL data shows that the worst sell-off was in the oil and gas sector, with a net outflow of Rs 4,973 crore, followed by power (Rs 2,848 crore) and metals (Rs 2,642 crore).
On the other hand, a tilt towards the capex theme was visible as FIIs pumped Rs 2,664 crore in the capital goods segment, which is a direct beneficiary of massive capex spending of Rs 10 lakh crore as announced in the February Budget.
FII dollars were also seen chasing stocks in services (Rs 1,963 crore), IT (Rs 1,069 crore) and healthcare (Rs 931 crore) in February. However, foreign investors ended up being net sellers to the tune of Rs 5,293 crore in the month.
“There is a clear change in the sell portfolio. In the first half of February, FPIs turned buyers into financials. They were selling in financials in January. Also, FPIs bought capital goods, IT and healthcare in the first half of February.
They sold oil & gas, metals and power,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Trend analysis of the last 6 months shows that FIIs have been net buyers of capital goods on all occasions, barring January. The net flow in the sector in the last 6 months comes to Rs 10,253 crore.Other top buys include FMCG, consumer services and healthcare. On the other hand, oil and gas stocks have seen a massive outflow of Rs 18,407 crore during the period. IT, consumer durables and power have also seen heavy selling by FIIs.
What should investors do?
Analysts are of the view that the worst of the FIIs outflow is now behind us as the strong earnings growth and economic recovery will play out in 2023.
“We believe that incremental foreign selling will decrease going forward due to valuation comfort, superior earnings growth versus EM peers, and the lowest decile foreign ownership,” said Mark Matthews, Head Research Asia, Julius Baer.
Global brokerage firm Jefferies favours domestic companies saying that a rising private capex and housing cycle will keep growth resilient. It is overweight financials, industrials, consumer staples and property and underweight IT, pharma and energy.
Axis Securities is bullish on banks and auto stocks. “We believe the outperformance of value stocks is likely to continue in H1CY23. This would be led by a pickup in credit growth as well as a recovery in the domestic-cyclical stocks, which would be in line with the pickup in the domestic economy,” said Axis Securities’ Neeraj Chadawar.
(With data inputs from 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)