Fab four for foreign investors corner 60% of FII inflows in FY24

FIIs continue to show confidence in India's capital goods sector, driven by robust growth in order books and revenue visibility.

Capital goods, consumer services, automobile, and financial services became the favourite sectors for foreign investors in fiscal 2024 and cornered over 60 percent of total foreign inflows, data on NSDL website shows.

In FY24, Indian equities received Rs 2.08 lakh crore from abroad. Capital goods received the largest share at Rs 46,935 crore, followed by consumer services, auto, and financial services with inflows of Rs 32,186 crore, Rs 29,862 crore, and Rs 28,793 crore, respectively. FIIs were consistent buyers in the capital goods sector throughout the year, while they turned sellers in the auto and consumer services sectors only in October 2023.

FIIs continue to show confidence in India's capital goods sector, driven by robust growth in order books and revenue visibility, primarily due to the government's infrastructure push in sectors such as roads, railways, defence and power.

The Nifty Auto index soared 43 percent in the past year, outperforming the Nifty 50. Strong sales from auto OEMs, coupled with news of product launches and favourable raw material prices, bolstered profit margins after challenging quarters last year. December quarter results from leading OEMs like Bajaj Auto Ltd and TVS Motor Company Ltd surpassed expectations, with double-digit revenue growth and a 100-basis-point operating margin expansion. However, this optimism appears to be reflecting in stock prices.

In the banking space, public sector banking stocks have attracted significant attention from FIIs, with analysts highlighting their undervaluation compared to private banks. Improved balance sheets and enhanced asset quality, characterised by low slippage ratios and reduced credit costs, have contributed to this interest in PSU banks within the banking sector.

Other sectors such as healthcare received Rs 16,687 crore, Telecom Rs 15,277 crore, Realty Rs 9,470 crore, Consumer materials Rs 7,814 crore, Consumer durables Rs 6,342 crore, and Information technology Rs 5,931 crore.

On the selling side, metals and mining saw the highest outflows at Rs 8,531 crore, followed by media and oil and gas with Rs 6,111 crore and Rs 5,774 crore. Construction and chemicals were drained of Rs 2,349 crore and Rs 2,144 crore during the fiscal.

"A stable domestic economy, political stability, and better than global economic growth are propelling FII inflows. FIIs are channelling extra investment into India's emerging growth areas, which is coinciding with the nation's transition towards new economic frontiers, which is manufacturing. This transition is adding growth to domestic industries, notably in heavy manufacturing, engineering, and the electrical and electronics. Consumer demand is constantly increasing due to solid growth in domestic economy like auto, hotels, personal care and durables," said Vinod Nair, head of research at Geojit Financial Services.

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