FPI buying in India's financials at six-month high in June, NSDL data shows

BENGALURU (Reuters) - Foreigner portfolio investors (FPI) snapped a two-month selling streak in India's financials and turned net buyers in June, hitting a six-month high.

The heaviest-weighted sector, financials, garnered FPI inflows worth 91.7 billion rupees (about $1.1 billion) during the month, the highest since December 2023, according to data from the National Securities Depository (NSDL).

The FPI buying in the sector came after two months of outflows worth 182 billion rupees, boosting the financials index, private banks and banking stocks 6.9%-8% higher in June.

"Once the concerns on the national elections-related uncertainty were over, the government was formed and ministries were allocated, the FPIs were assured of policy continuity," said Ajit Banerjee, chief investment officer at Shriram Life Insurance.

FPI outflows from domestic equities hit a record high on June 4, the election results day that showed a surprise weaker mandate for the ruling National Democratic Alliance.

"It appears the FPIs have realised that selling in the most-performing market would be a wrong strategy," Banerjee said.

Helped by the return of foreign inflows and sustained domestic buying, India's blue-chips Nifty 50 and S&P BSE Sensex rose about 7% each in June, the best monthly performance in 2024.

"Once the interest rate cut starts in the U.S., which is expected by the end of the year, it could trigger bigger FPI inflows into emerging markets like India as the arbitrage will open up between the two countries," said Viraj Gandhi, chief executive of SAMCO Mutual Fund.

Information technology companies led Indian shares higher on Thursday, in line with Asian peers, after softer U.S. labour data boosted hopes for a rate cut in September.

Telecommunication, consumer services, capital goods and healthcare sectors saw FPI inflows worth between 27 billion rupees and 80 billion rupees in June.

SAMCO's Gandhi said investor interest will likely continue in capex-linked themes like manufacturing, infrastructure, defence as well as consumption-linked themes including telecommunication and real estate sectors.

($1 = 83.5300 Indian rupees)

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sohini Goswami)