FIIs turn sellers after 6 months but bet big on these 2 sectors in April

The two sectors which continue to see highest net inflow consecutively for the two months are - FMCG and Realty, a report by Edelweiss Securities said

As foreign institutional investors (FIIs) turned net sellers in April, snapping their six-month buying spree, amid a violent and overwhelming outbreak of the second Covid wave in India, there were two sectors that still caught their fancy. 

The FIIs, which pulled out $1.29 billion from the equity markets last month -- their highest ever since March last year, still ploughed money in the FMCG and real estate sectors for two months in a row, shows a report by Edelweiss Securities.

"The two sectors which continue to see highest net inflow consecutively for the two months are – FMCG and Realty," the Edelweiss report compiled by Abhilash Pagaria said.

The FMCG sector saw inflows worth $244 million in April, while for the two months combined the figure stood at $516 million. The realty sector witnessed $213 million buying by FIIs in April and $710 million during the March-April period.

In the past one month, however, both, the BSE FMCG and Realty indices have underperformed the benchmark index. 

A shift to the FMCG space suggests a more defensive approach by FIIs towards domestic equities due to the second wave of the Covid pandemic. 

"Last year, when the pandemic played out in a big way, the first sector to rally was FMCG. Since many names from the sector have corrected, the FIIs are drawing inferences from experiences of the last pandemic and picking them," said G Chokkalingam, founder, Equinomics.

BSE FMCG index has lost nearly 3 per cent in the past one month as against a decline of 1.5 per cent in the BSE Sensex. Meanwhile, the BSE Realty index has declined a whopping 7.6 per cent in the same period.

Source: NSDL, Edelweiss Alternative Research

As for the real estate sector, analysts believe the possibility of a strong growth outlook is what's making FIIs bullish. 

"Due to the global stimulus, both monetary and fiscal, I am of the view that in the next two-three years, there will be a rally in the real estate space. The free money which is pumped into the system will inflate the asset prices. Since equity and commodity markets are already inflated, and next in line would be realty," said Chokkalingham. 

However, he suggested that one has to be very selective in picking stocks. Go for the plays that have a strong balance sheet, in terms of low debt, and a significant land bank, he said.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services believes that the historically low interest rate is also a big tailwind for the sector. 

On the flip, side, the top three sectors which saw maximum outflow during April were Banking & Financial ($1.12 billion), Oil & Gas ($466 million) and Metals & Mining ($242 million), the report added.