FIIs turn bullish on financial services segment; buy shares worth Rs 8,100 crore in second half of June

This comes on the back of buying worth around Rs 1,000 crore in the segment in the first half of June.

Foreign institutional investors appear to have turned aggressively bullish on the financial services segment and have bought shares worth over Rs 8,100 crore in the second half of June. This comes on the back of buying shares worth around Rs 1,000 crore in the segment in the first half of June.

Interestingly, FIIs were net sellers of financial services stocks in May with the monthly selling pegged at Rs 8,583 crore.

Market participants attribute this turnaround to the renewed bullishness for the segment amidst several upgrades by various broking firms. June also witnessed a strong rally in the segment, especially among private-sector banks.

In a recent note, Bernstein analysts praised Indian banks for strong credit growth, asset quality, and margins, highlighting large and niche lenders.

Similarly, CLSA highlighted the much stronger balance sheets when compared to five or ten years ago. Bank of America Securities gave 'buy' ratings to HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank for strong earnings and valuations.

Further, analysts expect these banks to outperform in Q1FY25 with robust margins and credit flow. Macquarie projects healthy ROAs and ROEs, citing resilience to ECL (Expected Credit Loss) regulations and stable net interest margins (NIMs).

Nomura highlighted deposit growth challenges but expects stabilisation with increased government credit or RBI forex purchases.

CLSA sees Indian banks' balance sheets as the strongest in a decade, with profits quadrupling in 10 years. It highlighted the fact that loan growth recently increased to 15%, and stated that deposit growth is expected to follow.

Private banks, previously lagging, should now offer better returns due to a strong business outlook and low valuations and the main key short-term risk is a potential repo rate cut impacting NIMs, it said.

Apart from financial stocks, FIIs also continued buying in consumer and capital goods sectors in late June, as per data from NSDL.

FIIs bought Rs 6200 crore in telecom, Rs 3100 crore in consumer services, Rs 2900 crore in capital goods, Rs 2886 crore in healthcare, Rs 2050 crore in auto, Rs 1578 crore in IT, Rs 1475 crore in construction, and a little over Rs 1000 crore each in oil & gas, consumer durables, and chemicals stocks.

Meanwhile, foreign investors remained net sellers in power, metals, and FMCG stocks. In June, they sold around Rs 2439 crore in power, Rs 1128 crore in metals, and Rs 677 crore in FMCG. In May, FIIs had sold over Rs 3000 crore in power, Rs 953 crore in metals, and Rs 4173 crore in FMCG.

Sectorwise FII

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