Bulls Take A Breather

Guess Who’s Back, Back Again?

Foreign institutional investors (FIIs) are officially back! They have been net buyers for three months in a row (March, April and May). In fact, FII net buying in May 2023 was the HIGHEST we’ve seen since February 2021! 🚀

Even on a 12-month rolling basis, FII flows have turned positive; a trend last seen in December 2021. Why should you care? Mostly because foreign investors play a big role in the way the market swings. FYI – FIIs were net sellers for most of 2022. 🙈

Now, which sectors have been the major winners? Let’s take a look:

1) Financial Services: After heavy selling between Jan-March, the BFSI sector received inflows worth nearly $2 billion between April 1- May 15 alone. What changed? For starters, the Reserve Bank of India finally hit a pause on its interest rate hikes in April. But more importantly, banks had a GREAT earnings season, with higher margins + improved asset quality. The Nifty Bank index is +8.25% over the past three months. 💸

2) Automobiles and auto components: The sector saw inflows worth a little over $1 billion in the last 3 months. The industry is rate-sensitive, so a pause in the hike cycle was positive. But beyond that, Q4 results beat expectations on most counts. The Nifty Auto index is +11% over the last three months. 💪

3) Metals and mining: The industry saw inflows worth over $550 million between March & May. The sector has been a play for the last 6 months partly due to a revival in Chinese demand. That said, some of the sheen has worn off in the last month as metal prices in international markets fell. 👀

Who Wants Chips?

Vedanta slumped 6% this week. Why? Reports indicated that the GOI was going to deny funding for its massive semiconductor plant in Gujarat. This is rough for cash-strapped Vedanta but is also another blow for India’s grand semiconductor plans. 💔

Rewind time: In 2022, the GOI created a $10 billion subsidy plan for global tech manufacturing giants to come and make chips in India. Why is this important? Firstly, semiconductor chips are used in everything from cars to computers. The world’s chip output is limited to a handful of countries like Taiwan. So, ‘securing’ a national supply is super crucial. Equally important: chip manufacturing will be a HUGE economic multiplier, with benefits flowing to many different companies & sectors. 📈

That said, India got 3 applications: a $19-billion plan from Vedanta-Foxconn JV, a $3-billion project from the ISMC consortium and another $3-billion proposal from IGSS Ventures. A year later, NONE of these projects have taken off. This is due to a range of reasons, from the GOI not approving certain technology partners, to a lack of regulatory approval. A bit of a downer tbh.👎

What does the road ahead look like? The GOI has denied the media reports on Vedanta. But the proof is in the chip pudding: the IT ministry announced that it will start “re-inviting applications” for companies that want to apply for semiconductor subsidies. Making chips in India is important. We’ll have to see if the GOI can pull it off. 🤞

Stocktwits Spotlight

HDFC AMC is +10% in the past month! Thank you Sri Fun Charts for the awesome call. Follow him for more amazing trade ideas and add $HDFCAMC.NSE to your watchlist to track its performance. Here’s the link: https://bit.ly/43i9fQH 

Disclaimer: All ideas shared by Sri Fun Charts are for educational purposes. Sri Fun Charts is neither SEBI registered nor an investment advisor.