Rs 11,000 crore puzzle: Look where the FPI churn happened in September

Home Markets Rs 11,000 crore puzzle: Look where the FPI churn happened in September
Rs 11,000 crore puzzle: Look where the FPI churn happened in September

NEW DELHI: September turned out to be particularly ruthless for stock investors who ran after rising US bond yields as the rupee slumped to a new life low.

Capital outflows picked up pace amid the domestic equity selloff as these overseas investors pulled back Rs 10,825 crore from India. In the process, their portfolio value took a beating as it shrank to Rs 27,30,061 crore (roughly $390 billion at 70 per dollar) as of September-end, from Rs 30,13,040 crore ($430 billion) at August-end.

The stocks they dumped could not be ascertained, but analysts pointed to banking and automobile as the sectors received severe battering last month.

The value of banking and financial stocks that foreign portfolio investors (FPIs) held as of September 30 stood at Rs 8.86 lakh crore, down by Rs 1.35 lakh crore, or 13.18 per cent, from Rs 10.21 lakh crore at the end of August, according to NSDL data.

For the month, foreign investors offloaded Rs 6,992 crore worth of banking shares while they picked up Rs 600-odd crore NBFC stocks.

Auto was also on the sell list. The institutional investors sold Rs 2,132 crore worth of auto and auto component shares during September. Their portfolio of auto stocks came down to Rs 2.07 lakh crore in September, from Rs 2.88 lakh crore in August.

The 2,418-point decline in September is Sensex's biggest point-wise monthly decline since October 2008. The index crashed 6.14 per cent last month that saw Rs 15 lakh crore investor wealth wiped out in no time.

The interesting point is, the stock correction in September and the one that followed in October still fail to support the valuations of banking and automobile counters, which are staring at downgrades in the ongoing earnings season.

Credit Suisse Wealth Management, in a note, expects domestic equities to go lower in coming months as it sees further earnings downgrades mostly led by financials and consumer discretionary plays, including automobile stocks.

“The Nifty and the Sensex still are overvalued. I have been saying repeatedly that the biggest pocket of overvaluation in the Indian market was financial services stocks. Their valuations made no sense at all a month ago. A further derating will come in wholesale funded lenders. There is still value in IT. There are lots of value in pharma and export-oriented auto stocks, which still are worth buying,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.

Additionally, these institutional investors were seen diluting their exposure to software and services construction materials, capital goods and transportation companies.

By contrast, they were net buyers to the tune of Rs 212- 753 crore in utilities, pharma, metals and mining and chemicals sectors.

The early shareholding data for the September quarter throw up more leads. Data for 180 of BSE 500 companies suggest that FPIs cut exposure to Bank of Baroda and Apollo Hospitals Enterprises. They also purportedly cut down their holding in The South Indian Bank, Apollo Tyres, V-Mart Retail, Bajaj Corp, Gujarat Pipavav Port and Divi's Laboratories.

Here goes the table:

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