REITs reduce their exposure to banking and financial stocks in the first half of FY22

Foreign Portfolio Investors (REITs) withdrew nearly 20,000 crore from the banking and financial sectors in the first six months of the current fiscal year, even as they increased their exposure to equities in defensive sectors such as property. of consumption, IT, pharmacy and telecom.

According to industry REIT flow data compiled from custodians, REITs withdrew 18,700 crore from the financial services industry between April and September. Of the total outflows, 13,872 crore went to the banking sector while 4,827 crore was withdrawn from “other financial services”, which covers financial institutions, non-bank finance companies (NBFCs) and credit companies. housing finance (HFC).

Also Read: REITs Invest Rs 1,997 Crore So Far In October

Within the banking sector, the equity segment experienced an outflow of 12,964 crore during the April-September period while the debt segment saw an outflow of 1,014 crore during the period. On the other hand, the other financial services category recorded an inflow of 1,159 crore in shares and an outflow of 5,797 crore in debt during the first two quarters of the current fiscal year.

“The financial services sector, particularly banking, has lagged market performance in 2021. Private sector banks have been the darlings of the market for many years when GDP growth was impressive. With growth taking a hit after the outbreak of the pandemic and the MSME segment in dire straits, credit growth has been weak and NPAs rising, ”said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

“The market reflects this reality of lukewarm performance of the banking sector. Clearly the market leaders in the current year are Nifty Metals, Nifty Realty and Nifty IT, with Nifty Bank falling far behind the performance of Nifty 50 on an annual basis, ”he added.

Defensive bet

REITs increased their bets on defensive sectors amid increasing volatility and hawkish political signals from global central banks. The ‘household and personal products’ sector recorded the highest REIT inflows over the past six months at 6,725 crore, followed by consumer durables (₹ 6,580 crore), retail (₹ 6 340 crore), telecommunications (₹ 5,773 crore) and insurance (₹ 2,881 crore).

With credit growth likely to accelerate in the second half of the current fiscal year, market experts believe REITs will focus on the banking and financial services industry again in the coming months. “Concerns about the potential increase in NPAs have kept FIIs nervous in the financial services space. Although economic activity has recovered well, loan growth has not yet recovered significantly. All of these factors have led to exits in the past. However, we believe the long-term outlook for the sector looks strong and that investors can continue to selectively invest in this space, ”said Ajit Mishra, vice president of research, Religare Broking.

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