FPI inflows at $4.5 bn in Q2; Domestic investors turn net sellers: ICICI

Foreign investors' inflows into equities more than doubled to $4.5 billion, while domestic institutional investors turned net sellers to the tune of $1.5 billion during the second quarter of the current fiscal, says a report.

However, the report by ICICI Securities noted that volatility in foreign portfolio investor (FPI) flows has returned after seven months and could continue in the third quarter.

FPIs had pumped in $1.7 billion into Indian equities during April-June quarter of 2016-17 as against $4.5 billion in the July-September period.

Further, DIIs were net buyers of equities amounting to $0.4 billion during the first quarter of the current fiscal but became net sellers to the tune of $1.5 billion in the second quarter.

This was despite mutual funds pumping in $0.7 billion into equities, implying that insurance companies were net sellers during the second quarter, the report noted.

The report said that Indian equities have been volatile with FPI flows being negative ($850 million till date) due to the overhang of US presidential election outcome and prospects of US Fed rate hike on global equity markets, so far in third quarter 2016-17.

"We expect the volatility in FPI flows to sustain in remaining third quarter of the current fiscal," it said.

As per the brokerage's analysis into FPI flows for BSE 100 stocks, Axis Bank, UPL, Tata Motors, Reliance Industries and LIC Housing Finance were the top buys for overseas investors in the second quarter of the current fiscal.

At the same time, major selling was seen in Sun Pharma, Infosys, Kotak Mahindra bank, Adani Ports and Asian Paints by FPIs.

"FPIs buying focus was largely seen in domestic economy focused sectors such as auto, metals, financials, materials and energy," the report said.

"Their selling focus was largely in sectors with foreign footprint (pharma and IT) with a few exceptions in telecom and consumer discretionary (largely Asian Paints)," it added.

Interestingly, FPIs bought equities in sectors where they have a underweight stance such as energy, PSU banks and staples, while they sold shares in overweight sectors like pharmaceuticals, IT and telecom.