FIIs continue favouring India, may reposition bets in financials, materials, and industrials sector

Foreign Institutional Investors have continued to pump money into Indian stock markets. In the previous month, FII inflows reached their record highs on Rs 60,358 crore and so far this month their investment has reached Rs 52,722 crore with still over a week left before the month ends. “Amongst sectors, FII flows were skewed in favour of Financials, Discretionary and Industrials sectors; whereas only IT and Real Estate sectors saw moderate outflows,” said Bank of America Securities. Analysts at BofA believe that FII could reposition bets in favour of Financials as well as the Materials & the Industrials sector.

Flows have been favouring the financial sector after the previous quarter results provided comfort on the NPA front while hinting at the potential return of loan growth. According to BofA Securities, FIIs increased their overweight position in financials, IT, and discretionary sector while maintaining their underweight position in materials, healthcare, utilities, telecom, staples, and industrials. “We see scope for repositioning in favour of well-capitalized private Financials as well as the Materials & the Industrials sector, given improved traction for Make in India & likely Government’s capex push,” BofA said.

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On the other hand, domestic institutional investors (DII) continue to pull money away from domestic stock markets but this time there has been a silver lining. “While active funds continued to see net outflows for the fifth month in a row, passive funds improved 116% MoM, with withdrawals across all fund types — large-cap, multi-cap, midcap, and smallcap,” they said.

Analysts at Bank of Americal Securities prefer HDFC Bank, HDFC, and ICICI Bank in the financial space. HDFC, the largest mortgage lender in India, has a price objective of Rs 2,590 set by BofA, up from its current market price of Rs 2,391 per share. Meanwhile India’s largest private lender, HDFC Bank has a PO of Rs 1,600, up from Rs 1,373 where the stock currently trades. Lastly, ICICI Bank has a target of Rs 560 per share. The stock currently trades at Rs 499 apiece. Apart from these, BofA also has a ‘Buy’ rating on Bajaj Finance, HDFC AMC, HDFC Life, ICICI Prudential Life, Mahindra Finance, SBI Cards, SBI Life, and Shriram Transport Finance in the financial sector.