The Signal: Powerful Comebacks: Indian Cricket Team & FPIs

Market Beats

Domestic benchmark indices ended on a flattish note with negative bias. Nifty50 and Sensex were down by 0.11 per cent and 0.05 per cent, respectively, during the week. Mid and small-cap space saw interest from the market participants.

Markets reacted to a slew of economic data released during the week. GDP grew by 13.5 per cent YoY in Q1FY23 due to the low base effect, which is still a long way to go to recover from the pre-pandemic levels. Along with this manufacturing, PMI was in the expansion phase for the 14^th month. The government collected Rs. 1.44 trillion GST in August 2022; the straight six months of over Rs. 1.4Tn mop-up.

Know what the sentiments on the street during the week

Hot Stuff – Powerful comeback of foreign portfolio investors (FPIs) in the financial service

The comeback is more remarkable than the setback!

~Twitter Update of Hardik Pandya

The recent comeback made by the Indian Cricket team’s batting line in the ongoing Asia cup 2022 series is remarkable. Special appreciation for Hardik Pandya, who hit the winning six against Pakistan on Sunday, and Virat Kohli, who regained his momentum to score big.

Indian financial markets witnessed a similar situation in August’22. Domestic equity markets have garnered the third highest foreign investor inflows of Rs.51,204 crore in August 2022 since the pandemic outbreak in 2020. The inflows were persistent despite the US Federal Reserve strongly reaffirming the unwinding of pandemic stimulus to tame inflation.

Source: ACE MF

It was the second consecutive month of positive flows. FPIs have withdrawn Rs. 2,55,879 crores from Oct’21 till June’22, but they have pumped in Rs.56,193 crore from July’22 till August’22.

Along with India, all other emerging countries like Brazil, South Korea, Thailand, Indonesia & Malaysia have also received positive flows in August’22. India received the highest inflows in August after consistently receiving the outflows for the first five months of CY22.

Softening dollar index & good corporate earnings were the key reasons for the inflows. Additionally, the commentary by the US chairman stating that the country is not in a recession helped improve the sentiment globally. The recent correction in the Indian equity markets gave them an excellent opportunity to enter.

FPIs have pumped in Rs.7,697 crores in the financial services industry, which is the highest compared to other sectors. Improving credit cycles, signs of recovery in Capex and rising asset quality have been the key reasons FPIs have increased their exposure in the banking space.

Let’s have a look at a few other reasons below:

• Banks have had a stellar run in Q4FY22. It’s been the best quarter for the sector in the last 26 quarters. Banks have seen a rise in profits & even the stressed assets have eased. Also, FY22 have been the most profitable year for this sector in the last six years, thanks to declining stressed asset, especially for the PSU banks.
• In Q4FY22, banks witnessed an 87% y-o-y & 8 per cent q-o-q growth in PAT. The current PAT stood at Rs. 48,776 crores. Also, in terms of value, the gross NPA is down by 2.9%, whereas Net NPAs are down by 8.1%. None of the PSU banks has reported a loss in the last four quarters. PSUs reported their highest-ever profits in FY22.
• Private banks specifically reported a net NPA of less than one per cent in Q4FY22 & also, and the gross NPAs declined by 6.6 per cent. Earning momentum & decrease in stressed assets also contributed to the rally.
• Ever since the market made a near bottom in mid-June, we have seen several stocks/sectors bounce back impressively. Apart from Adani group stocks that contributed most to the market-cap addition, private banks contributed majorly to the market cap gains. The banking sector has been the leading sector in the recovery phase and created massive wealth for investors.

Let’s have a look at the performance of banking stocks after FPIs started pumping in money:

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Happy Weekend!

You can also read:

Our brief coverage on the auto and auto components industry. Auto and Auto components have also been among the top six favourites of FPIs. Last week we did a brief coverage on the auto and auto components industry and the critical drivers for auto stocks’ outperformance even at inflated price levels. Here is a link if you want to read about our thoughts on the auto component industry (https://bit.ly/3RyLzkR).