FPIs dumped Indian financial stocks in January. But not all is bad for the sector.
1 month, 2 weeks ago

FPIs dumped Indian financial stocks in January. But not all is bad for the sector.

Live Mint  

MUMBAI : The banking and financial services sector, which holds a 34.35% weight in the benchmark Nifty 50, is bearing the brunt of broad-based selling by foreign portfolio investors. FPIs pulled out a massive $2,882 million from banking and financial stocks in January—the biggest outflow for the sector since they withdrew $3,109 million in October, showed data from National Securities Depository Ltd. Banks have seen lower growth in high-margin products like unsecured and credit card loans as compared to lower-margin segments like housing loans, which may put pressure on their financial performance, said Alok Agarwal, head of quant and fund manager at Alchemy Capital Management. However, while valuations appear stretched at present, selective opportunities still exist, offering potential returns in specific banking stocks, he clarified, adding that 2025 may not be a blockbuster year due to moderating earnings growth led by rate cycle and asset quality normalization, along with regulatory changes impacting performance in the life insurance sector. “While a rate cut cycle would put some pressure on margins and credit costs may inch up in the medium term, the strong asset quality of top banks suggests that credit cost normalization may take longer, which is a positive sign," said Shrikant Chouhan, head equity research, Kotak Securities Ltd.

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