Recovery taking shape, FPIs continue to buy financials | Economic Times

Mumbai: Foreign Portfolio Investors continued to mop up financial stocks in the month of December, by pumping in $2.3 billion, according to a report by IIFL Alternative Research. In November, FPIs had invested $8.1 billion in domestic stocks — a record monthly inflow — and about half of that or $3.9 billion went into banking and financial stocks. As per NSDL’s sector-wise data on FPI flows for December 2020, FPIs were net buyers of $8.41 billion across sectors. While inflows in November were partly because of the implementation of increased float factors in MSCI India, inflows in December were aided by FTSE’s implementation of the second round of float adjustment. According to IIFL Securities, FPIs have bought $8.3 billion worth of stocks in banking and financial services."FPIs have been chasing financials as they are betting on the recovery trend as a whole. Moreover, this is a sector with the highest weight," said Sriram Velayudhan, VP, IIFL Alternative Research. Velayudhan has a selective approach in the banking sector after the 85%-plus rally in the Indian benchmarks from the March 2020 lows. "Gradually, the market is entering an exuberance mode. For Nifty, 14,400 looks to be an interim target. HDFC Bank and Axis Bank are looking selectively attractive, and appear ripe to play a catch-up after brief spell of consolidation," said Velayudhan. The Bank Nifty ended up 0.2% at 31,791.7 and is less than 3% away from the record high of 32,613.1 hit on December 30, 2019. The index had plunged 50% in three months after hitting all-time high to a low of 16,116.25 in March 24, 2020. Since then the banking index has surged 93%, outperforming the Nifty.All eyes are on the third-quarter numbers which will be announced over the next three weeks for further direction. Analysts say the banking index may as well hit a record high in the near term but remain wary given the high exuberance in the market. Kotak Institutional Equities expects banks to recognise the stress accumulated over the past few quarters.