Why are FPIs selling off FMCG and power stocks in June?
"Continuing with the trend seen in the first quarter of this calendar year, FMCG companies saw foreign selling and preference for rate-sensitives and beta plays were the few reasons driving this trend," said Sriram Velayudhan, senior vice president, IIFL Capital. "Foreign investors are looking for better opportunities across sectors."
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Foreign investors extended their selling in the power sector, offloading shares worth ₹3,120 crore in the first 15 days of June, after selling ₹2,494 crore last month. The sector has seen outflows worth over ₹9,000 crore between January and May.
"Power companies had run up in the recent past, but the valuations are rich and not sustainable," said Siddarth Bhamre, head of institutional research at Asit C Mehta Intermediates.
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These investors allocated ₹9,674 crore across 10 sectors in the first-half of June, with financial services receiving the highest inflows-₹4,685 crore during the period-after witnessing a similar amount of inflows in May.
Between January and May, the sector, with the highest foreign investor holding, saw ₹4,771 crore worth of foreign investment.
Velayudhan said that the interest rate and Cash Reserve Ratio (CRR) cut by the RBI has prompted inflows into the financial services sector.
Beyond banking and financial services, their purchases in most of the other sectors were relatively modest.
"While it is tough to predict further flows, foreign investors are likely to be nimble-footed, so no major flows are likely amid the geopolitical tensions in the Middle East and the trade situation between US and China," said Bhamre.
Chemicals, oil & gas, and capital goods were among the other sectors that received flows in the first- half of June.
Bhamre said that the premium attached to the Trump tariffs is expected to come off given the back and forth on tariffs by Trump.
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