FIIs infused 70% of funds into banking, IT stocks in October, here's why

Banking and technology stocks have attracted a majority of inflows into Indian equities in October, according to NSDL data. These investors have infused Rs 16,945 crore into Indian stocks in October. Of this, stocks of these two sectors have seen 70% of inflows into Indian market amounting to Rs 12,827 crore. Banking stocks saw investment of nearly Rs 9,500 crore last month. This was evident in rally in BSE bankex with the index climbing 3,034 points in October.

The index which stood at 24,354 on September 30 rose to 27,388 on October 30 amounting to a rise of 12.45%.

In comparison, Sensex rose just 4% during the period.

The rally in banking stocks was led by better-than-expected Q2 earnings and improvement in asset quality of lenders.

For example, Axis Bank logged a profit of Rs 1,682.6 crore in Q2 against a loss of Rs 112 crore in the same period last year. Net interest income rose at a strong pace of 20 per cent to Rs 7,326 crore and net interest margin stood at a healthy 3.58 per cent.

Another private lender ICICI Bank reported an over six-fold jump in its standalone net profit at Rs 4,251 crore for the second quarter ended September 2020. The lender had posted a net profit of Rs 655 crore during the same period of the previous fiscal year.

FIIs infuse Rs 30,000 crore into Indian equity market in eight sessions

RBL Bank reported nearly three-fold rise in profit in Q2 led by higher fee income, strong growth in retail lending, lower operating costs and subdued provisions versus last year.

HDFC Bank too reported a 16 per cent rise in its consolidated net profit to Rs 7,703 crore in Q2 against a consolidated net profit of Rs 6,638 crore in the corresponding quarter a year ago.

Meanwhile, FPIs invested Rs 3,327 crore into shares of IT companies last month. IT firms have logged strong Q2 earnings despite disruptions on account of COVID 19 which affected earnings of other companies.

Software major TCS reported a 4.9 per cent rise in consolidated net profit to Rs 8,433 crore against net profit of Rs 8,042 crore in the September 2019 quarter.

Another IT firm Infosys posted a 20.5 per cent rise in Q2 net profit to Rs 4,845 crore, helped by large deals, prompting the IT services major to raise its revenue growth forecast to 2-3 per cent for FY21.

Infosys, which had clocked a net profit of Rs 4,019 crore in the year-ago period, said its basic EPS (earnings per share) has increased 20.8 per cent year-on-year to Rs 11.42.

Five factors that may affect market movement next week

FPIs also raised their stakes in automobiles, consumer discretions, capital goods, consumer durables and construction companies. Data show FIIs withdrew Rs 871 crore from oil and gas companies, Rs 847 crore from metals and a total of Rs 350 crore from telecom and insurance sectors.