FPIs pull out ₹50,000 cr from bank/finance sector

Foreign fund outflow from the banking and financial services sector crossed ₹50,000 crore in the first three quarters of the current fiscal amid rich valuations of the sectoral stocks and concerns over credit growth due to the new coronavirus variant.

Latest data from depositories show foreign portfolio investors (FPIs) have pulled out ₹50,892 crore from banking & financial services sector between April-December, 2021. Of the total outflow, 81 per cent or ₹41,249 crore was from equities while the remaining ₹9,743 crore was pulled out from the debt. Within equities, the banking sector witnessed the maximum brunt of FPI outflow with a net outflow of ₹34,406 crore while the other financial services sector lost ₹6,842 crore in the first nine months of the current fiscal. “The Indian financial sector, especially private sector bank stocks have been stellar performers in the past decade. FPIs, who traditionally have high exposure to the BFSI sector, have been selling the banking stocks as a measure of risk adjustment and to trim their exposure to the overweight banking sector in the medium term,” said Kranthi Bathini, director of equity strategy at WealthMills Securities.

‘Stretched valuations’

FPI flows have considerable influence on the performance of banking stocks given their highest allocation towards the financial services sector. Nearly one-third of FPIs assets under custody (AUC) are concentrated into banks and financial sector stocks.

In a recent…