Foreign portfolio investors (FPIs) who have funnelled more than Rs 58,000crore into equities since July prefer domestic economy-related sectors to those dependent on imported inputs or the overseas markets, analysts said. In the second half of this calendar year, FPIs have bought stocks in sectors such as consumer discretionary, financials, FMCG and telecom, while selling in oil & gas, IT and metals.

The selling by foreign investors that began in October last year because of tightening by various central banks got reversed in July by factors such as falling crude oil and commodity prices and valuations in various sectors coming to reasonable levels. According to data from NSDL, while net purchases stood at Rs 4,989 crore in July, they swelled to Rs 51,204 crore in August, the highest inflow in 20 months.

In September so far, FPIs have purchased stocks worth Rs 1,963 crore. Analysts are of the view that inflows will continue, but in selective segments. If the trend seen so far is any indication, the preference for domestic economy-related sectors is clear over those such as IT services where some amount of moderation in demand is seen because of global slowdown.

Though the economy will also be affected by the slowdown, the expectation is that it will not be as badly hit as some of the others. According to an ICICI Securities report, the hawkish comments by the US Federal Reserve chairman Jerome Powell at the Jackson Hole symposium is an extension of the QT (quantitative tightening) cycle which began in 2021and resulted in the biggest amount of FPI outflows from India over a one-year period.

It amounted to $33 billion for the TTM (trailing 12month) period ending June2022, including primary inflows. The analysts pointed out that the massive outflow in anticipation of the 1960s-80stype of extreme QT cycle, was an overreaction, which is now correcting via inflows seen since July.