FPIs play India's macro recovery with bank stocks | Economic Times

ET Intelligence Group: A high degree of concentrated bets on the Indian banking sector starting from the second half of May 2021 shows that foreign investors are building a strong case for a macroeconomic recovery in the country.Foreign portfolio investors (FPIs) have pumped in $954 million (Rs 7,000 crore) in Indian banking stocks in the second half of May 2021, the highest among all sectors, data from NSDL show.The flow into the banking sector is nearly double of the total inflow into other sectors in the second fortnight of May, an indication of the interest in banking stocks among overseas investors. Incidentally, the current flow into the banking sector has recouped nearly three-quarters of the total outflow from the banking sector in the last two months. There are only six occasions in the last one and a half years when inflows in banking stocks crossed more than $900 million.FPIs’ weightage to the banking sector improved by 20 basis points to19.43% in the second half of May 2021 as inflows resumed. It must be noted that banking stocks’ weightage in FPIs’ total equity portfolio dropped 264 basis points to 18.73% in the first week of May from the peak level of 21.37% in February 2021, as they pruned their exposure following the delay in economic recovery due to the second Covid-19 wave.However, the risk of earnings slippage eased with Covid cases falling and greater availability of vaccines. Optimism over the banking stocks can be gauged from the fact that analysts are projecting return on equity of shares of State Bank of India, India’s largest lender, to reach a decade-high of 15% in the next fiscal year, thanks to a recovery in the corporate cycle and normalisation of credit cost. At the end of May 2021, FPIs’ portfolio value of the banking stocks stood at $115.80 billion.FPI inflows took a sharp reversal from the second half of May 2021 and cumulative inflows between May 16 and June 4 reached $1.6 billion (Rs 11,600 crore).FPIs sold Indian equities worth $2.17 billion (Rs 16,802 crore) between April 2021 and May15, 2021. 83296760