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FPIs go big on auto as prospects look up | Economic Times

ET Intelligence Group: The auto sector is gradually gaining traction with institutional investors after a gap of nearly 10 months. Foreign portfolio investors (FPI) have invested $224 million (Rs 1,830 crore) in auto counters in the first fortnight of October when they just bought Indian equities worth $30 million (Rs 225 crore), data from NSDL show.On a fortnightly basis, FPIs' net investment in the auto sector has been the highest since the beginning of the year. In the past month, FPIs deployed about $641 million (Rs 4,800 crore) in Indian equities. Of this, nearly half have been deployed in the auto sector.Assets under management of auto stocks held by FPIs rose to 7.8% to $28.25 billion (Rs 2.1 lakh crore) in the last month, while total FPI equity AUM gained 1.8% in the same period. The auto sector weightage for FPIs stood at 4.13% as of October 15, 2021. 87246687The Nifty50 index currently has a weightage of 4.71% for the auto sector, which has been consistently dropping from the peak of 5.07% at the beginning of the year. It had dropped to a 13-year low of 4.7% in September.The strategy for the auto sector with local funds is no different. Domestic institutions increased allocations in September at 6.1%, up 20 basis points after dropping to a 17-month low in August. Interestingly, they have maintained overweight status in the auto sector, even as the degree waned from 6.6% in September 2020.The Nifty Auto index has gained 11% in the past month, while the Nifty 50 rose 3%.There are a couple of reasons why the auto sector is back on investors' radar. Firstly, the supply-side constraints on volumes eased with improving supplies of semiconductors from the ASEAN region. The utilisation of semiconductor suppliers in Malaysia - a source for chips for Indian automakers - has reached close to 90% in September. Second, new products launched by automakers got encouraging responses and bookings, allaying concerns about underlying demand. Third, the optionality element on auto stocks has emerged for valuation unlocking from the electric vehicles segment after Tata Motors was able to get a valuation of $9.1 billion for its EV passenger car segment.

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