Foreign investors continue to pull out of financials in second half of April

Synopsis

Foreign investors continued their sell-off in Indian equities, particularly in financials, extending withdrawals into the latter half of April. This sector saw significant outflows due to its heavy weight and inflation concerns. Conversely, power and capital goods attracted substantial inflows, driven by strong demand and global trends.

Mumbai: Financials remained at the centre of foreign selling in Indian equities with investors extending withdrawals into the fourth straight fortnight in the second half of April, as the sector's heavy weight left it exposed to their risk aversion.

The sector saw outflows worth ₹11,704 crore in the second half of the month, after selling of ₹19,152 crore in the first half of April, according to data from NSDL. The pace of selling moderated compared to March, when they divested worth over ₹60,000 crore -the highest since 2012.

"The unabated sell-off in banking stocks is due to the sector's high weightage in benchmark Nifty and concerns of higher inflation that could increase current account deficit," said Sonam Srivastava, f0ounder and CEO, Wright Research.

The withdrawals from financials accounted for over 41% of the overs0eas investor selling worth ₹28,301 crore across 15 sectors in the second half of April.

In the first part of the month, they dumped shares worth ₹49,481 crore across 19 sectors.

Agencies

Sector sees outflows worth ₹11,704 cr in April 2nd half, a fourth straight fortnight from the beginning of March

Other than financials, oil and gas, information technology and healthcare were among the sectors that bore the brunt of foreign selling.

These investors deployed funds worth ₹15,592 crore across eight sectors in the second half of April, with about 60% of the investments led by the power and capital goods sectors. Both sectors witnessed purchases worth over ₹4,500 crore each in the period.

Foreign investors bought shares worth ₹601 crore in the power sector in the first half of April, and while capital goods saw selling worth ₹328 crore during this period, the sector attracted inflows worth ₹3,148 crore in March- at the peak of the sell-off this year.

"Power demand has seen a strong global upswing, driven partly by rising investments in AI, which require large-scale data centres and reliable power infrastructure," said Saurabh Patwa, head of equities and portfolio manager at Quest Investment Managers. "Power transmission and distribution companies are witnessing record-high order inflows and have performed well on the back of this strong demand environment."

During periods of war, inflation and heightened uncertainty, investors often gravitate towards physical assets, which makes capital goods companies relatively well placed, he said.

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