Foreign Investors pour funds into key Indian sectors in H1FY24

In the first half of the fiscal year 2023-24 (April-September), foreign investors brought a substantial sum of Rs 1.44 lakh crore into Indian stocks, marking the highest inflow in over two years.

A closer examination of the sectors that received these investments revealed that a significant portion of these funds flowed into three key areas.

Approximately 70% of the total Rs 1.44 lakh crore inflow gravitated towards the financial services, capital goods, automobile, and auto ancillaries sectors, according to data from NSDL.

The financial services sector led the pack, attracting net inflows of Rs 52,472 crore during the April-September period, constituting 36% of the total net inflow. Notably, the Nifty Financial Services index delivered a robust return of nearly 10% during this period.

Securing the second position was the capital goods sector, which garnered net investments of Rs 28,758 crore from foreign portfolio investors in the six months ending in September. The S&P BSE Capital Goods index yielded an impressive return of 39% during this duration.

The automobile and auto components sector claimed the third spot in the list, drawing significant investments from foreign investors. Foreign portfolio investors injected over Rs 21,000 crore into this sector between April and September. The Nifty Auto index, during the same timeframe, provided an outstanding return of 32%.

An analysis of the performance of stocks in these three sectors unveiled several emerging stars during the first half of the current fiscal year.

Within the S&P BSE Capital Goods index, 18 of the included stocks generated double-digit returns, with one achieving multibagger returns. Suzlon Energy stood out as the top-performing stock, delivering over 200% returns to investors. Among large caps, Larsen & Toubro returned approximately 30% over six months.

The Nifty Financial Services index comprised about 13 stocks that generated double-digit returns, with one becoming a multibagger in the six-month period.

Additionally, 13 of the 15 stocks in the Nifty Auto index produced double-digit returns in the same period. TVS Motor Co provided returns of 34%, while auto component manufacturer Bharat Forge delivered over 35% returns, and tire maker MRF achieved approximately 21%.

While the auto, capital goods, and financial services sectors attracted a majority of investments from foreign portfolio investors, the information technology, metals and mining, and services sectors encountered significant selling pressure.

The metals and mining sector witnessed net outflows of Rs 9,200 crore from foreign portfolio investors in the six months ending in September, while the IT sector experienced net outflows of Rs 1,600 crore.

Looking ahead, given lingering inflation risks and expectations of sustained higher interest rates in global economies, many fund managers maintain a bullish outlook on domestic-focused sectors.