Foreign portfolio investors (FPIs) continued their selling streak in the Indian equity market, offloading $9.3 billion worth of stocks during the September quarter. This selloff has significantly impacted several companies, with some experiencing substantial declines in foreign ownership.

Key Highlights

• FPIs sold $9.3 billion worth of Indian equities in Q3
• Sona BLW Precision Forgings and PNB Housing Finance saw the largest drops in FPI holdings
• The selloff was initially driven by high valuations and later intensified due to trade policy uncertainties
• FPIs have sold $16.5 billion worth of Indian equities since the start of the year
• A modest buying trend has emerged since October

Companies Most Affected

Factors Driving the Selloff

The initial trigger for the selloff was the expensive valuations of Indian equities. This was further exacerbated by trade policy uncertainties imposed by US President Donald Trump, leading to more intense selling pressure from foreign investors.

Current Market Scenario

Despite the significant outflows, there are signs of a potential turnaround:

1. FPIs have turned modest buyers since October, adding about $550 million worth of shares.
2. Indian equities continue to trade at high valuations, with the Nifty50's one-year forward price-to-earnings multiple at 20.4 times.
3. Market experts, including Morgan Stanley's Ridham Desai, suggest a potential for a turnaround, noting that India's relative valuations have corrected to rarely seen levels.

Outlook

While the recent FPI selling has been substantial, the modest buying trend since October and the correction in relative valuations may indicate a potential shift in foreign investor sentiment. However, investors should remain cautious and monitor global economic factors and domestic market conditions that could influence FPI flows in the coming months.

As always, it's crucial for investors to conduct thorough research and consider their risk tolerance before making investment decisions based on FPI trends or market expert opinions.

Sona BLW Precision Forgings Limited (Sona Comstar) has reported its highest-ever quarterly revenue, EBITDA, and net profit in Q2, demonstrating resilience amid global challenges. The auto component manufacturer saw significant growth across key financial metrics, expanded its order book, and made strides in technological innovations.

Financial Highlights

Operational Performance

Despite facing headwinds, Sona Comstar showed strong performance across various segments:

• BEV revenue declined by 17%, now constituting 32% of automotive revenue
• Growth primarily driven by trains, tractors, and traction motors
• Railway segment, off-highway segment, and electric two-wheelers showed significant growth

Order Book and New Wins

The company's order book stands at ₹236 billion after a strategic review:

• EV programs maintain a 70% share of the order book
• Secured first order for Mexico driveline plant worth ₹2.6 billion
• Received nominations for two suspension system programs valued at ₹8.2 billion

Technological Advancements

Sona Comstar has made significant progress in its technology roadmap:

• Successfully developed rare-earth-free traction motors using ferrite-assisted synchronous reluctance technology
• Collaborated with Neura Robotics of Germany to develop advanced components for robots, cobots, and humanoids

Market Diversification

The company has actively diversified its revenue mix:

• India became the largest end market, accounting for 45% of revenue in H1
• North America contributed 30% to the revenue
• For the first time, eastern markets revenue surpassed that from western markets

Challenges and Responses

Sona Comstar faced several challenges during the quarter:

• Demand challenges from a global customer, particularly affecting one specific model
• Shortage of heavy rare-earth magnets impacting EV traction motor production
• Uncertainties regarding USA tariffs persisting

In response, the company:

• Shifted to alternative motor designs not relying on heavy rare-earth magnets
• Developed rare-earth-free motors for electric three-wheelers and light commercial vehicles
• Continued to focus on cost optimization and efficiency improvements

Future Outlook

While not providing specific guidance, management expressed optimism about future growth prospects:

• Expects opportunities to emerge from global market consolidation
• Anticipates significant new orders from European customers in coming quarters
• Views the railway segment as a promising growth area

Vivek Vikram Singh, MD and Group CEO, commented, "Our performance in this quarter underscores the first part of the anti-fragility hypothesis. We believed that many weaker players may not survive this disorder, while strong companies with technology moats and bulletproof financial foundations like ours would consolidate and grow over the medium term."

As Sona Comstar continues to navigate global challenges, its focus on innovation, diversification, and operational excellence positions it well for future growth in the evolving automotive and mobility landscape.