A telephone handset sits on a desk on the trading floor. (Photographer: Jason Alden/Bloomberg)

Foreign Investors Align Positions With Currency, Crude Volatility

A depreciating rupee and rising crude oil prices forced foreign portfolio investors to change the way they deploy funds in the Indian stock markets.

Foreign investors made a net investment of $256 million in August, primarily in utilities, pharmaceuticals, capital goods and textiles—sectors that are largely export-driven and benefit from a cheaper rupee—according to NSDL’s fortnightly data. That’s despite the selloff of about nearly $142 million in the last two weeks of the month.

Utilities, according to NSDL, includes electric utilities and auxiliary firms such as pipeline companies.

The rupee touched a new low of 72.74 against the U.S. dollar on Tuesday to close at 72.69—another lifetime low. The benchmark NSE Nifty 50 index fell nearly one percent in August, though it has turned in 7 percent returns year-to-date.

The software sector was a tale of two halves: it witnessed heavy selling in the first half of the month followed by buying interest in the second. The sector witnessed an outflow of $98 million, according to NSDL data.

Also read: Is Fear Creeping Into The Markets?

Outflows were led by companies in financial services, oil & gas, construction materials and transportation sectors in the last fortnight of August, according to NSDL data. In the same period, $1.4 billion worth of shares of firms across 18 sectors were sold.

At nearly half a billion, the financial services sector bore the brunt of foreign investor selling in the last fortnight of August, according to NSDL data. Investors sold $379 million worth of bank stocks and $118 million worth stocks of non-banking financial companies.