REIT exodus from D-St: IT, financial stocks sell best, industrial stocks largely buck the trend


The ongoing sale by FPI (Foreign Portfolio Investors) of Indian stocks is proving to be the highest selling spree since the 2008 global financial crisis, ICICI Securities said in a note. Additionally, analysts at the brokerage firm said IT and financial stocks saw the highest outflows amid this selling spree. “In terms of sectors, the bulk of REIT sales over the past 12 months have been concentrated in financials and IT (93% contribution) as well as consumer goods, other services and construction materials. construction, while metals, power, consumer discretionary and telecommunications saw inflows,” ICICI Securities. said.

Finance and IT see massive outflows

Comparing assets under management of REITs in the financial sector in May 2021 and June 2022, ICICI Securities noted a decline to 12.856 billion rupees from 15.218 billion rupees earlier. Meanwhile, AUM in the IT and hardware space fell to 5.094 billion rupees from 5.681 billion rupees in May 2021. Tracking REIT flows from June 2021 to date, financials have seen outflows worth Rs 1,067 billion while IT saw outflows worth Rs 765 billion. . Other sectors that saw sharp outflows include building materials, consumer packaged goods, and oil and gas.

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Exodus of REITs surpassed 2008

With cumulative 12-month secondary market REIT sales of $53 billion versus $28 billion during the GFC, according to preliminary exchange flow data, the outflow of REIT funds is greater than the financial crisis. “However, institutional net outflows (REIT flows + DII flows), based on preliminary data for secondary market flows, are relatively lower at $10.6 billion compared to GFC’s peak outflows of $8.6 billion. dollars, supported by strong DII inflows of $42.5 billion.

Ratings now comfortably

Analysts said the massive outflows of Indian stocks by REITs were largely driven by fears of aggressive quantitative tightening by the US central bank to tame inflation and the relatively higher valuations of Indian stocks. “However, valuations have rationalized significantly from October 2021 levels and fears of a structural rise in inflation are diminishing as global commodity prices decline over the recent past, which should bolster confidence in the gradual slowdown in REIT outflows,” they added. ICICI Securities said the risk remains in terms of elevated CPI inflation and crude oil prices that are yet to decline significantly from their recent highs.


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