FII selling crosses $1 billion in 3 sectors this month. Who's scaring big money?

Even though foreign institutional investors (FIIs) remain net buyers of Indian stocks this month with the good-old financials and IT on top of the buying list, 3 sectors - oil and gas, auto and FMCG - saw $1 billion exit.

NSDL data shows that in the first fortnight of December, FIIs sold Rs 5,337 crore worth of stocks in oil and gas sector, Rs 1,823 crore in auto and another Rs 1,655 crore in FMCG. The combined sell-off in all these 3 stocks have crossed $1 billion-mark.



On the net level, FIIs were net buyers to the tune of Rs 22,766 crore in the fortnight as compared to a smaller buying figure of Rs 809 crore in the previous fortnight.

Financial services were on top of FII buying list (Rs 7,424 crore), followed by IT (Rs 6,754 crore) and realty (Rs 4,689 crore). Other sectors like consumer services, capital goods, healthcare and construction also saw buying worth at least Rs 1,000 crore.

So far in the calendar year, oil and gas has been on the top of FII selling list with a cumulative withdrawal of Rs 50,851 crore in 2024 so far. Financials have, however, felt most of the impact with the selling figure nearing Rs 54,000 crore.

On the other hand, telecom, real estate, IT, healthcare, consumer services and capital goods have seen buying interest from FIIs in 2024.

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What led to the FII action?

FIIs, which sold Rs 116,437 crore worth of stocks in the festive months of October and November, have been fickle-minded in December as the buying trend in early December has proved to be, as feared, a flash in the pan.

The last 3 trading sessions have seen FII selling off about Rs 7,500 crore due to rising bond yields and strengthening of the US dollar.

"FIIs, who are major participants in the Indian equity markets, often wind down their trading activities towards the end of the year due to the Christmas Holiday in Europe and North America. This reduced participation can lead to lower demand for Indian equities, adding pressure to the Nifty," said Vinit Bolinjkar - Head of Research at Ventura Securities.

Fed's latest projection of having two interest rate cuts in 2025, half of what was expected in September, has only added to the selling pressure.

As we step into 2025, brokerages believe that the Nifty may give a double-digit return but upside may be capped.

"The valuations for Nifty, at 20.5x one-year forward PE, are ~6% above the past five-year average, and we expect market returns at 10% over CY25 in line with earnings growth. Rate cuts by the RBI (~50bps) are likely, as inflation cools off in the next few months. Given the cautious market outlook, we prefer largecaps over small and mid-caps," Jefferies said.

Bank stocks remain the brokerage's highest-conviction idea as growth gradually picks up.

Morgan Stanley has given a target of 93,000 for Sensex saying that with strong earnings, macro stability and domestic flows, it is hard to argue against India's investment case.

(Data: Ritesh Presswala)

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