Foreign Portfolio Investors (FPIs) have been actively investing in the Indian stock market, infusing over 5,400 crore during the first fortnight of April 2024. This significant inflow has driven the FPI equity portfolio to a record high. Notably, FPIs have shown a preference for cyclicals and capital-intensive stocks, with significant investments in sectors such as power, financials, industrials, autos, telecom, and realty. This buying trend is primarily driven by an optimistic near-term growth outlook for domestic cyclicals.
In contrast, FPIs have been selling defensive stocks, including those in the IT and FMCG sectors. Data from the National Securities Depositories Ltd (NSDL) indicates that FPIs sold IT stocks worth 4,658 crore and FMCG stocks worth 4,351 crore during the fortnight ending April 15.
The record-setting FPI inflows have been primarily driven by the purchase of power sector stocks, which saw an inflow of 5,143 crore. Financial services and consumer services sectors also witnessed significant inflows, worth 3,212 crore and 1,713 crore, respectively. Other sectors that attracted FPI investment include automobile and auto components (1,679 crore), telecommunications (1,659 crore), and capital goods (1,228 crore).
Analysts attribute the outperformance of beta stocks to a positive near-term growth outlook for domestic cyclicals, despite geopolitical tensions and rising US bond yields. They also highlight the continued factor outperformance of small size, beta, and value stocks, reflecting the texture of the economy where the ‘investment rate’ is expected to surpass the 2012 peak of 34% with improving ICOR and declining NPA cycle.
