Foreign institutional investors (FIIs) poured in USD 6.7 billion in Indian equities, led by domestic news flow such as state and civic election wins for NDA, improved fundamentals, as well as initiation of crucial reforms such in sectors such as real estate and banking.
In Q1FY18, till date FPI outflows (USD 0.5 billion) have been marginal from Indian equities although debt inflows continue to be strong (USD 3 billion) and in line with other EM trends, ICICI Securities said in a note.
Recent data suggests that FIIs have been busy accumulating stocks in sectors such as private retail banks, telecom, Infrastructure, cement, pharma, and power.
Top ten stocks where FIIs holding increased in the last two quarters include names like Bharti Infratel, LIC Housing Finance, Bharat Forge, REC, Power Finance Corporation, NMDC, Cipla, Hindalco, Tata Global Beverages, and Tata Power.
FIIs have been busy shedding stake in companies in sectors such as autos, pharma, steel etc. A sharp drop in FII holding could be taken as a warning sign that fundamentally does not support the current price trend.
Top ten companies where FIIs decreased their holding in the last 6 months include names like Dr Reddy’s Laboratories, Aurobindo Pharma, Jindal Steel, Divi’s Laboratories, Britannia Industries, Tata Motors, Adani Ports, Lupin, ACC, and UPL.
FIIs reduced their holding in Hero MotoCorp and United Breweries after increasing in the last two-quarter which suggests caution.
If we closely monitor FIIs portfolio then up to 30 percent is concentrated in stocks like Infosys, HDFC Bank, HDFC, TCS and Reliance Industries.
The foreign institutional investors pulled out nearly Rs 1400 crore so far in the month of May and history suggests that there is 50 percent chance FIIs will turn net sellers in this month.
Although, ‘Sell in May and go away’ is a well-known trading adage for global markets such as the US but for India FIIs have turned net sellers in 5 out of last 10 years, according to data collated by Moneycontrol.com.
The sell-in-May-and-go-away strategy comes in handy to avoid the typically volatile May-October period. However, for India, analysts are more optimistic about Indian market but does not rule out a possibility of some consolidation considering markets are trading at record highs.
“The ‘Sell in May and Go Away’ strategy is more applicable to the US markets and not India. In India, this saying shows a mixed trend. In India May month is typically a continuation month as the prevailing trend normally continues,” Deepak Jasani, Head – Retail Research, HDFC Securities told Moneycontrol.com.
“In India, we have historically seen the markets either topping out of bottoming out between November and February. We don’t think May will be a topping out month this year for India. If at all we may see some consolidation for a few months followed by the next leg up,” he said.