NEW DELHI: Moderating their pace of buying in banks and financial services, foreign institutional investors or FIIs raised their bets on three sectors – FMCG, consumer services and realty – in the month of December just ahead of the busy Q3 earnings season.
NSDL data shows that the largest bet of FIIs was in FMCG, which was among the top performers in the calendar year 2022, with a net purchase of Rs 4,019 crore. FIIs who were net sellers in realty in November took a u-turn last month and ended up picking stocks worth Rs 3,248 crore.
FII shopping list also included consumer services (Rs 3,650 crore), financial services (Rs 2,597 crore) and capital goods (Rs 2,150 crore). Total net buying for December was worth Rs Rs 11,119 crore.
On the other hand, foreign investors were seen dumping IT stocks. After US tech major Accenture signalled a slowdown in discretionary spending and did not increase its FY23 revenue guidance, most global brokerages are bearish on stocks of Indian IT services.
FIIs’ top sells also included oil and gas, power and telecom.
What should investors do?
The pace of FII selling has increased in the last few days as FII money is seen chasing lower valuations in underperformers like China and Europe.
“This trend might continue imparting weakness in the Indian market. This trend will open opportunities for investors. FIIs will sell stocks in which they are sitting on profits, like the banking segment. And this segment continues to be strong. Last year, too, selling by FIIs in banks turned out to be opportunities for domestic investors,” said Dr. V K Vijayakumar of .
A study of historical FII flow by SAMCO Ventures shows that foreign investors are likely to return in 2023, after being net sellers to the tune of Rs 2.7 lakh crore last year, with double-digit gains in 2023.
At this stage, however, foreign investors are worried over valuations as the Nifty is trading at 18.8x 12-month forward earnings, compared with a historic 10-year average of 17.2x.
Analysts say the two major factors that would determine stock price movement this month, other than global macro factors, depend on how the December quarter earnings season pans out and expectations around the Union Budget.
Kotak said it expects Q3 net profits for Nifty50 to increase 11% YoY and 9% QoQ. Autos and banks are expected to report a sharp increase in quarterly net income on a YoY basis while downstream oil companies and metals & mining sectors are expected to report a decline in net income.
(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)
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