ITC, Bharti Airtel, Maruti Suzuki and NTPC are among a handful of common Nifty top-performing stocks in the periods of foreign outflows, said IIFL Securities based on six phases of FII flows (four buy periods, two sell periods). The phases were marked by flows in excess of $10 billion, IIFL said.
In its study, IIFL found that perceptions such as private banks being outperformers if FII buying happens might not hold true always, or even at all. It said while a few sectors were faithful “FII Beta” sectors, most had idiosyncrasies that dominated.
"Some of the worst-performing sectors over these periods like real estate and telecom may have left their worst periods behind; whereas a key all-weather performer auto, may not have quite as much wind in its sails in the medium term. IT and Pharma are decidedly not defensives – in fact, data shows energy (including upstream oil) is more defensive," it said.
IIFL said regular outperformers during FII outflow periods included Bharti Airtel, GSK pharma, ITC, Maruti Suzuki, NTPC, Power Grid and Sun Pharma. Regular underperformers during FII outflow periods included Bajaj Finance, DLF, Hindalco, IndusInd Bank, SAIL, Tata Steel, Tech Mahindra.
On the flip side, regular outperformers during FII inflow periods include Axis Bank, Bajaj Finance, IndusInd Bank, Jindal Steel & Power, Mahindra & Mahindra, Tata Motors & Tata Steel. Regular underperformers during FII inflow periods included Bharti Airtel, Britannia Industries, HPCL, Hindustan Unilever, IOC, NALCO, NTPC, PNB and SCI.
"Surprises include some names that would definitely look out of place in Nifty 50 today – PNB, Nalco, Shipping Corp, NMDC and Zee Enterprises. Another surprise is in metals – generally a high beta sector. But NMDC, Nalco and Sail are regulars in the bottom 20 in FII inflow periods," IIFL said.
"Further, Hindalco was one of the worst Nifty 50 stocks in the great bull run of 2003-2007, but had recovered its mojo in the next FII bull run of 2009-2010. The next surprise to highlight is ONGC – it has languished in the bottom 20 in 2 of the 4 FII fuelled bull runs," it said.
What lies ahead?
IIFL sees a period of consolidation in India markets, with Nifty oscillating in a relatively narrow range. It expects FII flows back into emerging markets and a build up of risk on sentiment later in the year. That said, it felt that the impact of FII buying over
the medium term will be less pronounced than hitherto, as DII investments have substantially increased.
IIFL said it has Bharti Airtel, Bank of Baroda, SBI Life Insurance, InterGlobe Aviation, NPTC, Sun Pharma, HDFC Bank and DLF as its top 2023 picks.
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