Foreign investors flock to companies focused on domestic sectors

Foreign portfolio investors (FPI) have flocked to companies focused on the domestic sectors since their recent return to the Indian market, largely ignoring the defining sectors. export direction.

India’s economic recovery and softer commodity prices are expected to boost earnings for domestically focused companies, while export-oriented sectors remain vulnerable to currency volatility. currency, geopolitical instability and ongoing slowdown in developed countries.

Among the main areas of new interest to FPI are finance, consumer discretionary, industrial, fast moving consumer goods (FMCG) and telecommunications. The banking, financial services and insurance sectors, which saw FPI sell $7.36 billion in the first half of 2022, saw FPI net buy $1.73 billion in the second half so far. Aug. 31. The FMCG sector saw $1.66 billion in FPI purchases in July and August.

The outlook for banks remains strong, fueled by increased credit growth, improved asset quality and better-than-expected net profit margins in the coming quarters. Meanwhile, the outlook for FMCG is brighter thanks to output growth supported by an economic recovery and falling commodity prices.

Kunal Vohra of BNP Paribas Equities Research said: “We believe Indian FMCG companies are poised for a rebound in volume and margins since 2HFY23.

Moderate input prices after a strong increase in Q1 also support FMCG companies. The upward trend in prices continued, albeit at a slower pace, as companies sought to offset the impact of inflation in previous quarters.

According to Nishit Master, portfolio manager at Axis Securities, India is a home-oriented economy with favorable demographics, strong manufacturing base, skilled workforce, government and government stable policy, less dependent on the needs of the developed market for growth.

Telecommunications saw FII inflows reach $943 million in July and August, while the industrial, capital goods and construction sectors received more than $1 billion in aggregate investments. la. Consumer car and auto companies saw $844 million worth of FPI investments in July and August, while healthcare services attracted more 1 million dollar.

Meanwhile, FPIs turned away from industries such as oil and gas, IT and metals.

The metal has seen a price correction as expected demand in the developed world weakens. Oil and gas producers are hit by the loss of tax revenue, while oil marketers see marketing margin uncertainty as they cannot fully overcome high crude oil prices.

Information technology services continue to see weakness as a decline is expected in developed countries and the benefits of a strong dollar are negated by other weakening currencies.

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