Equity benchmarks made a sharp recovery on May 20 after a heavy decline in the previous trade, with the Sensex jumping over 1,200 points after a gap-up opening. Foreign institutional investors (FIIs) were net sellers again on May 19, selling shares worth Rs 4,900 crore.
Nilesh Shah, managing director of Kotak Mahindra Asset Management, in an interview with CNBC-TV18 lists out three reasons behind the major sell-off by FIIs and talks about sectors he is bullish on in the near term.
Edited excerpts
When will FIIs turn net buyers in Indian markets?
If you look at FIIs selling since October 21, first, it's partly driven by India's premium valuation over its peer group. Second, FIIs are booking profits because there is profit on the table. Third, Indian markets are liquid enough for them to make an exit.
In the last 10 years, India's equity market return has been double that of the emerging market.
In the current scenario, FIIs would like to take some profit due to rising commodity prices and inflation.
India is one market that gives them profit and also an exit. The pressure is likely to continue for some time.
Which sectors do you see outperforming in the next couple of quarters?
Apart from sectors, there will be two filters through which we will pass our investment, one, valuation filter and, two, governance filter. We will invest in companies that are well-governed and are available at a reasonable valuation.
We are bullish on banks and financial services on a select basis. We are bullish on the industrial engineering and the capital goods sector.
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