November report card: Banking, finance stocks dominate FPI flows

A moderation in new non-performing loans (NPL), improvement in margins, and loan growth are attributed as the reasons for the bullishness in banking stocks

Banking and finance stocks cornered the highest foreign portfolio investor (FPI) flows that came into the domestic market in November.
 

Last month, FPIs bought finance stocks worth $1.74 billion, the most since February 2021, according to a note by IIFL Securities.
 

As a result, the FPI allocation towards the banking & financial pack rose to 32.3 per cent, highest since October 2021.
 

A moderation in new non-performing loans (NPL), improvement in margins, and loan growth are attributed as the reasons for the bullishness on banking stocks.
 

"Personal loan segment is growing. That segment is much more profitable and less NPL prone, compared to industrial loans. The credit card and gold loans business of banks are also growing faster,' said G. Chokkalingam, founder, Equinomics.
 

In November, FPIs were net buyers to the tune of $ 4.7 billion with 10 out of the 14 sectors witnessing inflows.

 

Foreign investors bought FMCG stocks worth $635 million.
 

"Input prices for FMCG companies have come down and there is an expectation that wheat prices will also come down. And whenever there are rate hikes by the Federal Reserve, there is FPI buying in FMCG as they are considered as defensive bets," said Chokkalingam.
 

IT stocks, meanwhile, saw inflows of $474 million -- highest since January 2021. The FPI allocation in IT now stands at 10.7 per cent, still below the highs of 15.6 per cent seen in December 2021. The allocation to oil & gas stocks rose to its highest level since April 2021, after inflows of $341 million last month.
 

Foreign investors sold telecom stocks worth $133 million and power stocks worth $114 million. Capital goods stocks saw buying worth $336 million, the highest monthly inflow since January 2021. November was the seventh straight month FPIs bought capital goods stocks.
 

Autos, cement, FMCG and pharma stocks saw inflows for the fifth consecutive month. The FPI allocation in cement, at 3.2 per cent, rose to its highest since January 2018. The allocation in the real estate sector at 1.1 per cent fell for the fourth consecutive month.