Shopping spree continues for FIIs:
Foreign institutional investors (FIIs) bought Indian equities worth more than $8 billion in November. Banking, FMCG, pharma, and auto stocks were the top picks as 50% of the inflow went to these sectors.
Foreign portfolio investors also pumped in a whopping $8,132 million in Indian equities in November. Banking & Financial ($3,914 million), FMCG ($951 million), and Pharma ($681 million) were the hot picks among the FPIs as well.
Surplus global liquidity due to low-interest rates have driven the capital flows into emerging markets (EMs), including India. Economic recovery, vaccine hopes, and recent adjustment in the MSCI Index have also made a huge impact.
We believe that foreign fund flow will continue to remain strong in FY21 as well. However, the momentum could slow down from the current levels.
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Why are mutual funds selling?
Equity mutual funds witnessed an outflow for the fifth straight month in November despite the benchmark indices scaling lifetime highs.
Net outflow from equity and equity-linked mutual fund schemes stood at Rs 12,917.36 crore in November. The outflow was at Rs 2,724.95 crore in October. It is the biggest monthly outflow since April 2018.
The selling in mutual funds is coming at a time when foreign buying is at its peak. Some of the selling could be attributed to profit booking. HNIs and family offices are also redeeming for their businesses which need support due to the Covid-19 impact.
Nilesh Shah, MD, Kotak AMC also attributed the selling due to the
asset reallocation. Citing an example of his balanced advantage fund, he stated that in January, we were at a 40% allocation to equity. In March, equity allocation was at 80%. Today, it is back to 45%.
Auto industry leads the fight against environmental change:
India has the potential to emerge as a global leader for electric vehicle manufacturing, believes Nitin Gadkari, Union Minister for MSME, Road, Transport, and highways.
Speaking at TiE Global Summit 2020, he further stressed India's efforts to develop biofuels for a cleaner environment. The country is blending ethanol with fuels. The ethanol is being produced from sugarcane, molasses, and corn. Besides that, research is going on for developing hydrogen fuel cells.
Last month, addressing the G20 summit, Prime Minister Narendra Modi had announced that India is not only meeting Paris Agreement targets but also exceeding them. Yet, India has a long way to go in its fight against environmental change.
Developing Electric vehicles and other alternative fuels is crucial in this fight. India is already home to Rs 4.5 lakh crore automobile and auto ancillary industries. Alternate fuels & electric vehicles are next in line of development and carrying a huge potential for the future.
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