FMCG, Financials, IT See FII Outflows; Metals, Durables Draw Buying in Early January

Foreign Institutional Investors (FIIs) had continued to liquidate Indian Equity in the first half of January. Sectors facing the most demand were Fast-Moving Consumer Goods (FMCG), Financial Services and Information Technology. According to National Securities Depository Limited (NSDL) data for January, FMCG stocks experienced the most selling at more than ₹6,128 crore, following on the heels of more than ₹5,844 crore of net selling in December.

The Financial Services Sector saw outflows of more than ₹3,190 crore due to continued selling, which was stronger than December's level of sales. The Information Technology Sector sold ₹2,075 crore of its holdings, having purchased a net amount of stock from December.

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Heavy Selling in Key Sectors

The FMCG Sector saw the largest outflow, reflecting a continued downtrend for that sector. Additionally, the financial services sector remains under considerable selling pressure from a continuing trend of outflows.

The IT Sector reversed its prior purchases in December to sales of a net ₹2,075 crores. Other sectors, such as consumer services, services and telecommunications, experienced net sales of ₹1,952 crores, ₹1,587 crores, and ₹2,075 crores, respectively. Outflows were also noted in the Healthcare and Realty sectors.

Buying Shifts to Metals and Durables

During the month of December, commodity research for metals and mining sectors attracted considerable attention from FIIs, as evidenced by their investment of over ₹2,689 crore into these industries. Other sectors showing positive inflows from FIIs during December were: capital goods (₹326 crore) and consumer durables (₹322 crore). 

All three sectors demonstrated a level of outperformance compared to the rest of the market that was in decline during this same time period, since there were expectations that buyers would be seeking opportunities for recovery within these sectors due to the current state of market rotations.

Broader Trends and Context

The month of December provided context for how the market will behave, both positively and negatively. The market saw significant selling in FMCG and financial services, and only marginal buying activity in telecom.

The trend observed within January mirrors that observed during December regarding cautious behaviour surrounding defensive and technology sectors, while continuing to have the majority of the money flowing into cyclicals, specifically, metals.