In just two months, foreign investors have pumped over ₹35,000 crore into financial services and automobile stocks, after the two sectors collectively drove the corporate earnings and profitability in the previous fiscal.
As per the NSDL data, foreign portfolio investors (FPIs) infused ₹25,361 crore in net investments into the financial services sector in April and May.
FPI investments into Indian equities itself touched a nine-month high of ₹43,838 crore in May, led by positive global cues, higher GDP numbers and growth in high-frequency indicators. In April, the foreign investors made a net investment of ₹11,631 crore into Indian equities.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the major part of these inflows went to financials, particularly banking due to its impressive credit growth and declining non-performing assets (NPAs). “The net profit of the banking sector has multiplied 5X since 2018.”
According to Motilal Oswal Q4 earnings report, the combined profit after tax (PAT) of 228 companies in the broking firm’s universe went up 15 per cent year-on-year to ₹2.41-lakh crore in FY23 from ₹1.78-lakh crore in FY21.
The brokerage firm said Q4-FY23 corporate earnings were primarily driven by financials and automobile sectors. “The banking sector reported a strong Q4-FY23, driven by healthy loan growth, stable margins and continued asset-quality improvements,” it added.
Auto focus
Foreign investors also pumped in ₹10,689 crore in auto stocks in the first two months of FY24.
Himanshu Singh, Research Analyst at Prabhudas Lilladher, attributed the inflows to overall positive sentiment in the automobile industry. He said original equipment manufacturers (OEMs) are coming out from a period of high commodity inflation and supply chain disruption to a more stable operating environment.
“Volumes are expected to grow at a long-term growth rate, margins are expected to improve YoY in FY24, good recovery in the rural markets could further propel the growth for the industry,” he added.
Ashwin Patil, Senior Research analyst at LKP Securities, also said FPIs are bullish on the automobile sector due to its long-term growth prospects. “Prospects look bullish (for auto industry) as the chip supply issue which had troubled the sector over the last couple of years is easing rapidly now, thus catering to the pent-up demand for PVs, premium bikes and EVs,” Patil said.
He further said commercial vehicle (CV) cycle is also expected to remain robust on a strong industrial capex outlook. “Two-wheelers also seem positive on good monsoons, marriage season, low base and sentiments. Considering these facts, investors remain sanguine on the sector,” he added.