Lok Sabha elections 2019: How FIIs have lapped up bank equities in poll season

With the general elections underway and with all its associated volatility in full play, foreign institution investors (FIIs) have lapped up the banking stocks to strengthen their position in the market and maximise trading gains in this election season. Bets around elections have historically yielded well, analysts said. This time around, banking and financial equities are receiving the highest inflows largely owing to the falling interest rates, which will convert to higher earnings. A strong comeback has been witnessed, after dismal buying interest among FIIs last year. While in January FIIs sold Rs 2,587 crore worth of stocks, February and March saw foreign investors buying a healthy 18,278 crore, National Securities Depository Ltd (NSDL) data shows. This investment was key in the markets touching fresh highs. 

Foreign investors sold bank equities worth Rs 24,300 crore between April 2018 and January 2019. Thereafter, banking stocks have led the gains on the Sensex and Nifty. The Nifty Banking index touched lifetime highs followed, days later, by the benchmark Sensex. FII money was the major support in this. 

Financial equities also saw a strong inflow in February and March with foreign investment of Rs 10,326 crore and Rs 15,802 crore, respectively, as against the sales of Rs 2,587 crore in January. 

Besides, auto scrips also witnessed slight recovery in their inflows. FIIs turned buyers of auto scrips in March with Rs 479 crore of inflow, in sharp contrast from January and February, which saw a selling of stocks worth Rs 922 crore and Rs 140 crore, respectively. 

The FII inflow was a reflection of the poor auto sales globally owing to tepid demand. 

The US-China trade tensions and Brexit woes also made auto stocks the least preferred by FIIs during the last fiscal. 

The auto sector globally is facing regulatory changes with tougher emission norms which will drive prices higher, and this impacted consumer sentiments. As a consequence, FIIs sold auto scrips during most of the months in the last fiscal, NSDL data showed.