Financial stocks cornered over half of $3.56 billion FPI flows in Feb

Sector now has 34.8% of FPI assets, up from 33.8% in Jan; flows drove banking index to all-time high

Banking and financial stocks got more than their fair share of foreign portfolio investor (FPI) flows in February. Overseas investors pumped in $3.56 billion into domestic equities last month. Of this $1.96 billion went into financial stocks, data analysed by Edelweiss shows.

“The sector now has 34.8 per cent of FPI assets, up from 33.8 per cent in January. The flows drove the banking sector index to an all-time high,” said Abhilash Pagaria, analyst, Edelweiss Securities.

The Bank Nifty index rose as much as 22 per cent in February but later gave up some gains but still ended the month with a 13.5 per cent gain. In comparison, the benchmark Nifty gained about 6 per cent.

The oil & gas sector attracted flows of $676 million in February, most in nearly two years. The sharp flows propelled several stocks in the banking and energy space.

State Bank of India rose 38 per cent, IDFC Bank gained 34 per cent, while IndusInd Bank and Bank of Baroda rose about 25 per cent each in February.

“We wouldn’t be surprised if a major chunk of inflows would have chased PSU (public sector undertaking) banks,” said Sriram Velayudhan, VP, Alternative Research, IIFL Securities. “With FPI ownership in PSU Banks at multi-year lows it will be interesting to monitor the FPI ownership figure in PSU banks in the months ahead.”

The Nifty PSU Bank index rose 32 per cent in February, even as the Nifty Private Bank index rose just 11 per cent.

Meanwhile, Gujarat State Petronet and ONGC rose 26 per cent each followed by BPCL and Reliance Industries which rose 18 per cent and 13 per cent respectively.

Sectors that saw FPI pullout ended the month with negative returns or underperformed the Nifty.

For instance, IT index fell 1.5 per cent as the sector saw outflows of $321 million. FMCG sector saw close to $100 million of outflows and the sectoral gauge declined 2 per cent in February.