FPIs pruned exposure to banking and financial stocks in FY22: Analysis

Foreign portfolio investors (FPIs) drastically pruned their exposure to banking and financial stocks during the 12-month period ended March 2022. In March 2021, FPIs had invested every third dollar (33.1 per cent) in banking and financial stocks. This came down by 430 basis points (bps) to 29.1 per cent at the end of March 2022, shows an analysis done by FPIs. The drop in the exposure to the financial space comes on the back of $17.1 billion selling by overseas investors in FY22.

As FPIs deploy the maximum in the banking sector, it has to bear the brunt during episodes of capital repatriation.

Within the banking and financial space, private banks and insurance accounted for maximum FPI outflows in FY22. As a result, the gauge for the performance of private banks sharply underperformed. It rose just 4 per cent in FY22 compared to 19 per cent jump in the Nifty 50 index.

After financials, auto, cement & construction and capital goods were the other sectors where FPIs reduced their exposure. The auto gauge also underperformed, gaining just 7 per cent in FY22.

Meanwhile, FPI exposure to the oil & gas, power and IT pack saw an increase of 200 bps, 180 bps and 100 bps respectively. The oil & gas sector outperformed with a 42 per cent increase in FY22.