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Financials are the top choice for foreign investors in June.

Data from depository institutions showed that foreign portfolio investors (FPIs), who have been buying Indian stocks for three consecutive months, continued to do so in June. Their top choices were financials and oil & gas stocks.

FPIs poured 89.46 billion rupees ($1.05 billion) into financials in June - 61.3% of the month's total 145.90 billion-rupee inflows, aided by attractive valuations, a sharper-than-expected 50-basis-points interest rate cut by the Reserve Bank of India, and a 100 bps reduction in the cash reserve ratio.

Since the beginning of the month, foreign funds have invested 456.57 bn rupees into the financial sector. This has fueled an 18% increase in the industry.

After a large outflow of foreign investors in the first quarter of this year, they have now returned to Indian stocks.

Saurabh PATHAK, Head-Investment Counsellor at PurnarthaPMS, said: "This sudden shift in stance is due primarily to improvements in the domestic fundamentals.

"A favorable India-U.S. Trade Deal could boost FPI confidence significantly and encourage them to continue participating."

India and U.S. negotiators have been racing to reach a deal before President Donald Trump’s deadline of July 9, 2017.

Oil and gas stocks attracted inflows as well, particularly in late June when a ceasefire agreement between Israel and Iran brought down crude prices. The oil and gas index rose by 3.6% in the last month.

The early monsoon, and the cooler temperatures than expected, slowed down demand.

Also, consumer stocks worth 39.85 Billion Rupees have been sold.

Kranthi Bathini is the director of equity strategy for Wealthmills Securities. She said that investors are waiting to see clear signs of an uptick in consumption. (One dollar = 85,3410 Indian rupees).

(source: Reuters)