Financial services saw the maximum selling by FIIs after witnessing buying for four straight months. FIIs sold shares worth Rs 2,821 crore in this sector in the first half of August, according to data released by NSDL.
Between April and July, they have pumped in a whopping Rs 56,000 crore alone in the financial services sector.
Fast-moving consumer goods (FMCG), one of the sectors contributing to the D-Street rally, also fell prey to selling by FIIs, who sold shares worth Rs 2,022 crore in the first two weeks of this month.
Between March and July, the FMCG sector has seen inflows worth over Rs 12,100 crore from FIIs.
After two months of buying, the trend reversed in the metals sector, as FIIs sold shares worth over Rs 1,000 crore in the last fortnight.
Meanwhile, the pace of the buying by FIIs slowed down significantly in key frontline sectors such as information technology and capital goods.In the IT sector, FIIs net bought shares worth Rs 371 crore in the last fortnight, compared to Rs 1,631 crore in the preceding fortnight.
In the capital goods sector, they net bought shares worth Rs 2,459 crore in the last fortnight, compared to Rs 3,211 crore in the preceding fortnight.
Has the euphoria fizzled out?
On a cumulative basis, FPIs have net invested Rs 10,758 crore so far in August, whereas in July, their net purchases were to the tune of Rs 34,222 crore.
The slowdown in the buying could be attributed to the firming up of bond yields, higher crude oil prices, and resurfacing inflation risks.
In the minutes of the last meeting, officials of the Monetary Policy Committee of the Reserve Bank of India said that the panel will be ready to pre-empt any impact of food price shocks on the broader inflationary pressure.
In July, India’s headline inflation, based on the consumer price index, shot up to a 15-month high of 7.44% due to skyrocketing retail prices of vegetables, particularly tomatoes.
Not only in India, but inflation risks persist globally too, restraining global central banks from hitting the pause button.
The recent rally in equities does not factor in some of these risks, making valuations a bit uncomfortable for some money managers.
“The continued rally on the back of liquidity is now posing challenges…We are, therefore, circumspect about committing fresh flows to mid and smallcap equities,” said Roopali
Prabhu, head of products and solutions, Sanctum Wealth Management.
“While we hold a neutral stance on equities currently, we believe it would serve portfolios well to rebalance now,” Prabhu added.
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