indices: Foreign players sell more of index-heavy Financial Services, FMCG & Capital Goods in Feb

Financial services continued to bear the brunt of unabated foreign selling as investors dumped shares of ₹5,344 crore in the first 15 days of February after selling around ₹25,000 crore in January. In 2024, they pulled out shares worth ₹58,280 crore from the sector.

Banks and lenders are bearing the brunt of the foreign selling because of their dominant weights on the Sensex and Nifty. So when overseas investors sell Indian stocks, they end up selling bank shares the most. Moreover, concerns over the rise in bad loans are also weighing down sentiment.

“The delinquencies are likely to rise in the banking sector in the personal loan and credit card segment while the credit offtake is anticipated to fall, which is negative for the sector in the next couple of quarters, said Siddarth Bhamre, head of institutional research, Asit C Mehta Intermediates.

Agencies

Fast Moving Consumer Goods (FMCG) and capital goods witnessed foreign selling worth ₹4,336 crore and ₹3,206 crore respectively after selling around ₹5,000 crore in each sector last month. The Union Budget on February 1 when the government cut income taxes to boost consumption, was expected to be a trigger for these consumer-related stocks but after the initial surge the rally fizzled out. Investor appetite for capital goods has dimmed in the absence of immediate triggers

“The overall budget allocation for capex spending was lower than expected and since the valuations were relatively higher, which led to selling in capital goods sector stocks,” said Pankaj Pandey head of retail research, ICICI Securities.Even though the valuations have come off, the growth for FMCG companies is expected to remain in mid-single digits and the sector is likely to underperform the benchmark Nifty, said Pandey.Bhamre said that the tax benefit is likely to take its full effect in the next year and no immediate spending is likely. “While the FMCG and consumption-based stocks moved up based on sentimental basis post Budget, they have fallen since,” said Bhamre.

Global investors offloaded shares worth over Rs 2,000 crore in oil & gas, consumer services and construction materials sectors. Overseas investors bought shares worth Rs 5,337 crore across seven sectors in the first half of February.

Telecommunication sectors witnessed inflows worth Rs 2,337 crore while foreign investors infused funds worth Rs 1,534 crore and Rs 693 crore in healthcare and Information Technology (IT) sectors respectively.

“The inflows in sectors like telecom, healthcare and IT is likely due to their defensive nature,” said Bhamre. “With the dollar appreciating, IT is where one would choose to hide.”

Analysts said that as of now, the intensity of the selling seems to have reduced but it’s tough to predict if there is a conclusive bottom in pace. Further foreign selling heavily depends on further developments on Trump’s tariffs tantrum, said Pandey. “The aggravation in the sell off is anticipated to reduce as foreign investors generally invest in large cap stocks, and while the valuations in these stocks may not be attractive, they are fairly valued,” said Bhamre.