FPI Inflows increased towards banking sector: Current Affairs Special Series

Team Adda247 and BankersAdda are here with a Current Affairs Special Series. In this series, candidates will be introduced to current affairs topics daily, which will not only improve their general awareness but also will ensure that the candidates do not lack in any current affairs topic. Today’s Current Affairs topic is FPI Inflows increased towards banking sector.

FPI Inflows Increased Towards Banking Sector

With high degree concentration of bets on the banking sector by foreign investors starting from the second half of May 2021 shows foreign investor’s confidence for a macroeconomic recovery in the country. 

Foreign Portfolio Investors (FPIs) have pumped in 954 million dollars (Rs.7000 crore) in Indian banking stocks in the second half of May 2021, which is the highest among all the sectors based on data from NSDL. The flow is nearly double of the total inflow into other sectors in the second fortnight of the month of May which shows interest and confidence of foreign investors in banking stocks. There are only six occasion in the last one and half years when inflows in banking stocks crossed more than $900 million. FPIs have given more weightage to the banking sector which improved by 20 basis points to 19.43% in the second half of May 2021 as inflows resumed. It is noticeable that banking stocks’ weightage in FPIs’ total equity portfolio dropped 264 basis points to 18.73% in the first week of May from its higher level of 21.37% in February 2021, as FPI presumed that there would be a delay in economic recovery due to the second Covid -19 wave. 

The risk of earning slippage eased with Covid cases falling and greater availability of vaccine. Optimism over the banking stocks can be gauged from the fact that analysis are projecting return on equity of shares of SBI, india’s largest lender to reach a decade-high of 15% in the next fiscal year, thanks to a recovery in the corporate cycle and normalization of the credit cost. 

FPI inflows took a sharp reversal from the second half of May 2021 and cumulative inflows between Mat 16 and June 4 reached 1.6 billion dollars (Rs.11, 600 crores). FPIs sold Indian equities worth 2.17 billion dollars (Rs.16, 802 crores) between April 2021 and May 15, 2021.