Banking Sector Remains The Favourite Among Foreign Investors
Here’s what foreign investors bought and sold in March.
Foreign investors pumped in the most money in six years into Indian equities last month ahead of the general election and fourth-quarter earnings season.
Overseas investors pumped in a net $5 billion into the equity market in March—the most since October 2012—after pulling out about $2.4 billion a month ago, according to data available on National Securities Depository Ltd.'s website.
India’s benchmark Nifty 50 Index rallied nearly 8 percent in March as the market recovered from its February low.
Foreign institutional investors remained buyers of bank stocks for the second straight month, investing nearly 27 percent of the funds—or $1.3 billion. The sector received the highest foreign monthly inflows in over two years, according to NSDL data compiled by BloombergQuint. Of this, $688 million came between March 16 and March 31.
NSE Nifty Bank Index hit an all-time high in March after it rallied 13.6 percent, led by a jump in Punjab National bank, Bank of Baroda and IDFC First Bank Ltd.
The systemic credit growth has recovered to a five-year high of about 14 percent, while the deposit growth remains modest at 10 percent, Motilal Oswal said in a research note on March 13.
We expect credit growth to remain strong, given the improving economic parameters and rising share of banks in the total credit needs of the economy. Key beneficiaries of this trend will be lenders with strong liability franchise, as it will allow a smooth flow of funds at reasonable costs.Motilal Oswal Research Report
Insurance sector received the second-highest overseas flows last month. Foreign investors funnelled net investments worth about $1.06 billion in the sector, the highest monthly inflows in at least a year—data on the NSDL website was available only from March 2018.
To be sure, foreign inflows into individual banking stocks in March were not available. Some insurance companies sold stake through block deals and offer for sale.
On March 1, Carlyle Group said that it acquired 9 percent stake in SBI Life Insurance Company Ltd. from BNP Paribas for Rs 4,600 crore. BNP Paribas Cardif, a subsidiary of the France-based BNP Paribas group, sold 9.2 crore shares or 9.23 percent stake in SBI Life, and 9 crore of those were acquired by CA Emerald Investments, an affiliate of the Carlyle Group, according to a statement.
On March 12, Standard Life Aberdeen Plc’s Mauritius arm announced the divestment of its 3.47 percent stake in HDFC Life Insurance Company Ltd. via offer for sale to meet the market regulator’s public shareholding norms. It raised about Rs 2,502 crore once the OFS was fully subscribed. The OFS, which took place on March 12-13, was subscribed 1.83 times, according to the NSE data.
Besides, ICICI Prudential Life Insurance Company Ltd.’s promoter Prudential Corporation Holdings sold 3.73 crore shares or 2.6 percent stake on March 26. The offer was subscribed 4.41 times, NSE data showed.
It was not known clearly if there was a surge in FII shareholding in these companies as the entities update the details of shareholding pattern on a quarterly basis and the insurers are yet to disclose shareholding as of March end.
Non-banking lenders, oil and gas, electric and other utility companies were among the sectors to receive most investments.
Non-banking financial companies received the highest foreign fund flows in at least seven years since the comparative data was available only since March 2012.
The Outflow Picture
Automobile and auto component companies witnessed the highest net foreign fund outflows in March. It was followed by media, hotels, restaurants and tourism and diversified sectors.