• In Q2 FY23, Tata Steel, HUL, Bharat Electronics, ITC, Zomato were among the most bought stocks in FPI list.
  • Index heavyweights such as Reliance Industries, top four IT giants and Kotak Mahindra Bank witnessed heavy selling by FPI during the September quarter.
  • FPI flows reduced by more than half in the September quarter, which amounted to ₹48,570 crore compared to ₹1.07 lakh crore in the previous quarter in June.
  • Looking ahead, analysts believe buying will increase as the dollar index – currently at 106 – drops below 103, and there is a dip in crude oil prices and treasury yields.

Foreign capital flows into Indian equities remain volatile, although India has outperformed most of its peers for much of this year. Foreign investors mostly bet on defensive and attractive stocks. Some of their favorite stocks in the September quarter were Zomato, Hindustan Unilever, ITC and Tata Steel. However, they continued to sell index heavyweights over the same period.

Although portfolio flows recovered in July and August, foreign portfolio investor (FPI) inflows more than halved in the September quarter – investment fell to ₹48,570 crore from ₹1.07 lakh crore in the previous quarter, data from Prime Database Group shows.

This resulted in FPI’s share of ownership in the market dropping to its lowest level in 10 years of 19.03% as of 30 September 2022, down 17 basis points from 19.20% as of 30 June 2022.

“This further demonstrates the rise of domestic investors and the enormous counterbalance role they have played against foreign investors. As an illustration, as of March 31 2015, FPI’s share was 23.30% while the combined share of DII (domestic institutional investors), retail and HNI (high networth individuals) was only 18.47%,” said Pranav Haldea, MD at Prime Database Group.

Leaving aside the first half of November when FPI splashed out ₹28,888 crore, they have been selling aggressively in recent months due to macro concerns and weak inflation data in India.

“FII sold a lot in the September quarter because they didn’t expect inflation to come down. Also the dollar index is up. However, now, with the positive data coming in, FII has bought a significant amount of equity in November so far. In the near future, the street is expecting inflation in the US to come down,” Shrikant Chouhan, head of equity research (retail) at Kotak Securities told Business Insider India.

Chouhan sees FII buying internet- and software-based companies where revenues are strong. Additionally, “BFSI, capital goods and real estate are the main sectors they are focusing on and will see inflows in the next six months,” said Chouhan.

In Q2 FY23, Tata Steel, Bharat Electronics, ITC, Zomato were among the most bought stocks on FPI’s list.

The company that saw the highest purchases by FPI in the September quarter

These stocks are FPI favorites even as they sell index heavyweights

Food delivery company Zomato, which debuted on the secondary market in July 2021, is also a favorite with FII. FPI purchased shares of Zomato for ₹8,057 crore during the quarter. Note that the company has written off 51% of its share value so far in 2022 due to persistent losses.

“They also buy companies that have comfortable valuations and protected downside like Zomato,” said Chouhan.

Looking ahead, analysts believe buying will increase as the dollar index – currently at 106 – drops below 103, and there is a dip in crude oil prices and treasury yields.

“Real buying will occur when the dollar index trades below 103, if Brent crude starts below $90 and the 10-year treasury dips below 3.50%,” said Chouhan.

Index heavyweights such as Reliance Industries, top four IT giants and Kotak Mahindra Bank witnessed heavy selling by FPI during the September quarter. This massive sell-off in top IT companies has led to a 10-40% correction in these stocks this year.

The company that experienced the highest sales by FPI in July-September

These stocks are FPI favorites even as they sell index heavyweights

There were 11 companies where promoters, FPI and DII had increased their shares during the quarter, these shares were – Astral, Uno Minda, Atul, Maharashtra Seamless, Share India Securities, Mirza International, Sarda Energy & Minerals, Meghmani Organics, Mrs. Bectors Food Specialties, NCL Industries and Poddar Housing & Development.

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