Capital goods, infra & banking sectors in focus for FPIs
The list of sectors and also cos, which find favour with FPIs seem to be increasing as India remains as fastest growing economy
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FPIs seem to be back with a bang. They seem to be looking at India and investing all over again. One needs to understand where they are investing and also what could be prompting the same.
Nifty 50, as the index is popularly known as, is skewed in favour of the financial sector and banks with roughly over 40 per cent weightage. Very clearly, if one is bullish on India and its stock markets and not so on the banking space or banks, things will just not work.
The infusion of capital by the government in the public-sector banks has paid rich dividends and the cumulative profit of these PSU banks was roughly Rs1.05 lakh crore for the year 2022-23. The big change one is seeing in the country is the thrust and emphasis on improving the infrastructure across the length and breadth of the country. Roads, bridges, expressways, trains and airports and better inland connectivity through the waterways and rivers of the country, is all happening.
The softening of crude prices has seen the cost of petrol and diesel input costs reduce significantly without matching fuel pump prices reduction. This has helped the CAD (current account deficit) come under control. In the medium to long term, the effect of this would be that the rupee begins to hold its ground against the basket of currencies and also against the dollar. Even today, as we speak, the Indian Rupee is performing well against the basket but facing some pressure against the dollar.
FPIs are investing in capital goods manufacturers as they see the capex cycle picking up. Investments in infrastructure companies involved in construction are yet another favourite of such investors. Companies connected with the railways from the private sector, logistics, ports and even utilities are on the shopping list.
