Now, consumer discretionary displaces financials as FII favourite

Changing a five year trend, stocks from the consumer discretionary sector have emerged as the highest overweight sector for foreign institutional investors, replacing the financial sector.

An overweight position means that the investor holds a position which is in excess of a sector or stock’s weightage in an index against which he benchmarks his performance.

The overweight for consumer discretionary stocks is at the highest level since 2008, and three out of the top ten showing higher ownership are stocks from the sector, according to a Bank of America Merrill Lynch India Equity Strategy report authored by research analysts Jyotivardhan Jaipuria and Anand Kumar.

“Consumer discretionary has emerged to be the highest O/W (overweight) sector replacing Financials which was the maximum O/W sector for last 5 years,” noted the report dated 21st August.

“Financials is now the second highest O/W sector. Muted buying compared to its weight in FII portfolio largely negated the impact of lower free floats of some of the financial stocks,” it added.

The report was part of a quarterly round-up of change in ownership patterns. It noted that domestic institutional investors were underweight on both financial as well as consumer discretionary stocks.

“However, on the similar lines of FIIs, domestic mutual funds are also underweight on Software, metals & mining sector and Energy sectors,” said the report.