As foreign investor sentiment turns towards Indian equities, Jefferies sees large-caps emerging as the biggest beneficiaries of this revival trade.
FPIs have net purchased Indian stocks worth ₹53,739 crore in the first nine days of November, turning buyers, after months of relentless selling. Till October, FPIs sold equity shares net amounting to ₹2.95 trillion, NSDL data shows, making it the worst year in terms of outflows.
Against this backdrop, the global investment bank said: Given higher liquidity and FPI ownership, we see large caps as the more direct beneficiary of revival in FPI flows. “Large-cap valuations have turned more reasonable, with the Nifty 100 trading at 18.6x 1-year forward P/E, ~5 per cent below its 10-year avg. Also, India offers significantly low beta.”
It highlighted Reliance, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Max Health, JSW Energy, Ultratech Cement, Indigo, Varun, IHCL, DLF, Sona BLW as top plays on FPI reversal.
Jefferies identified these plays based on three FPI ownership foced screens:
Screen 1: Where have FPI outflows been the largest?
Sectoral analysis of FPI data shows that financials have seen the largest outflows since September 2024 at $17 billion, followed by Consumer Staples at ~$11 billion and energy, autos and IT at ~$9 billion each.
At the stock level, the largest estimated outflows between September 2024-26 has been in Reliance Industries and HDFC Bank (~$8 billion each), ICICI Bank and Axis Bank ($5 billion), followed by M&M and Kotak Mahindra Bank ($3 billion).
Screen 2: Where has FPI ownership fallen the most?
FPI ownership in BSE 500 stocks has fallen to the lowest level in the last 10 years, at 17.3 per cent, highlighted Jefferies.
Screen 3: Where has relative FPI positioning fallen the most?
Alongside a decline in neutral weight for India, individual stocks have seen a hit in their relative (to MSCI India) positioning too. HDFC Bank has seen the largest reduction, with its relative OWT falling 2.4 ppt to 1.0 ppt. Axis Bank positioning fell 0.4ppt, while Kotak Bank, Reliance Industries, JSW Energy, BHEL each saw positioning fall by ~0.3 ppt.
Sectorally, relative positioning has fallen most since Sept 2024 in Industrials (-1.3 ppt) and Financials (-1 ppt), Jefferies observed.
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