By Bharath Rajeswaran
(Reuters) -Foreign portfolio investors (FPIs) continued buying Indian equities for the third straight month in June, with financials and oil and gas stocks emerging as their top picks, depository data showed on Friday.
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.
Foreign funds have invested 456.57 billion rupees in financials since the beginning of March, fuelling an 18% surge in the sector.
Foreign investors have returned to Indian equities after hefty outflows in the first three months of the year.
“This sudden change in stance is primarily due to improvements in domestic fundamentals, particularly the moderation of headline inflation,” said Saurabh Pathak, head -investment counsellor at Purnartha PMS.
“Going forward, a favourable India-U.S.
trade deal could significantly boost the FPI confidence and encourage their continued participation.”
India and U.S. trade negotiators are racing to cut a deal ahead of President Donald Trump’s July 9 negotiation deadline.
Meanwhile, oil and gas stocks also attracted inflows, especially in late June, as a ceasefire between Israel and Iran calmed crude prices. The oil & gas index rose 3.6% last month.
In contrast, foreigners pulled out 63.11 billion rupees from the power sector, as an early monsoon and cooler-than-expected temperatures dented demand.
Consumer stocks worth 39.85 billion rupees were also offloaded.
June-quarter earnings will be key to reviving flows into consumer stocks, with investors awaiting clear signs of a consumption rebound, said Kranthi Bathini, director of equity strategy at Wealthmills Securities.
($1 = 85.3410 Indian rupees)
(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sumana Nandy)
