What FIIs bought and sold in India in April 2022?

6 May 2022 , 06:18 PM

If February and March 2022 were the accentuation of geopolitical tensions, the month of April 2022 was all about the pressures created by Fed hawkishness. Well before the end of April, it was almost evident that the Fed would hike rates by 50 bps in May and amplify it with a hawkish timetable and aggressive winding down of its bond book.

In April, the early signals from the quarterly results were not too encouraging. The combination of tepid IT numbers and hawkish monetary stance meant that FPIs were heavy sellers in banks and IT, which was the  highlight of April 2022, as we shall see later.

FPI selling in April was definitely lower than the previous 3 months. In Jan-22, FPIs sold $4.46 billion of equities and $4.71 billion in Feb-22. In Mar-22, FPIs sold another $5.38 billion of equities, but Apr-22 FPI selling was subdued at $2.36 billion. FPIs sold close to $17 billion in Indian equities in first 4 months of 2022.

To be fair, some amount of FPI selling in April was also driven by the mega LIC IPO, which has hit the IPO market in the first week of May 2022. In Apr-22, the FPIs bought $0.37 billion in the first half, but sold equities of $2.73 billion in the second half.

Industry Group	Assets Under Custody (AUC) of FPIs – $ Billion (April 2022)
Financials	186.27
IT Services	77.45
Oil & Gas	76.97
FMCG	36.36
Power	31.10
Pharma and Healthcare	29.58
Automobiles	28.99
Consumer Durables	23.93
Metals & Mining	21.22
Telecom	15.13
Consumer Services	14.46
Chemicals	13.47
Capital Goods	12.72
Cement	10.44
Top 14 Sectors	578.08
Other 8 sectors	31.05
Total FPI AUC	609.13

Data Source: NSDL

List of the AUC mix in April 2022

The table above covers the top 14 sectors where AUC is more than $10 billion. In the new classification, NSDL has modulated the list from 40 sectors to 22 sectors. Out of 22 sectors that FPIs invest in, AUC of the top-14 sectors accounted for 94.90% of the total FPI AUC of $609.13 billion. The Apr-22 AUC at $609.13 billion is down -1.55% over Mar-22 AUC; driven by selling in financials and IT.

Financials, comprising banks, NBFCs and insurance accounted for 30.58% of FPI AUC, which approximately corresponds to the weightage of financials in the Nifty index. The other significant AUC contributors were IT at $77.45 billion, Oil & Gas $76.97 billion, FMCG $36.36 billion, Power $31.10 billion, Healthcare $29.58 billion, Automobiles $28.99 billion and Consumer durables $23.93 billion. AUC depletion was most prominent in financials and IT.

To summarize the broad theme of April 2022, the pockets of buying were concentrated in the defensive bets. Healthcare and FMCG attracted buying interest from FPIs due to better pricing power and ability to tackle the supply chain bottlenecks. The financials were vulnerable after it almost became certain that the Fed would hike rates by at least 50 basis points in May. The one heavyweight that continued to see buying support during the month was Reliance Industries, which managed to scale record market cap during April.

Which sectors were on the FPI buy list in April 2022

Data Source: NSDL

FPIs sold $5.38 billion in Indian equities in Mar-22, but the selling has tapered to $2.36 billion in April 2022. Obviously, sectors witnessing buying would be limited, but there were still some defensive bets that got the FPIs interested during April 2022.

Two sectors attracted a lot buying interest from the FPIs due to their relatively defensive nature. Healthcare topped the charts with net FPI inflow of $686 million while FMCG sector attracted FPI inflows to the tune of $230 million. Healthcare is considered less vulnerable to supply chain issues and the resurgence of COVID was seen as an opportunity. While FMCG stocks were under pressure due to input cost pressures and ban on Indonesian palm exports, FPIs focused on the top-notch FMCG with pricing power. Apart from these two sectors, there was good buying into automobiles at $152 million and power at $73 million.

What are the sectors that FPI sold into in Apr-22?

The big selling was back in the financials and IT sector. FPI sold $1,373 million of Financial stocks and $1,036 million of IT stocks in April 2022. Financials came under pressure after the hawkish signals from the Fed. FPIs sold in Financials expecting the higher rates to hit loan growth, making borrowings costlier and also because it would hit the bond portfolios held by financial companies. IT got a thumbs down after the quarterly results showed a rise in attrition and a sharp fall in operating margins. A weakening US economy is not good news.

Among other sectors that saw consistent outflows, Capital Goods saw FPI outflows of $273 million and Media saw outflows of $236 million in Apr-22. The selling in media was largely driven by selling in the Zee stock, which has a major weightage in the media index. The other big sells were oil & gas at $159 million, construction at $137 million and realty at $108 million in the month of April 2022. The spike in the price of power and fuel has kept fuel-intensive and freight intensive sectors like cement and construction under pressure.

IPO versus Secondary Market flows of CY 2021 and CY 2022

Calendar Year 2021	FPI Flows – Secondary Markets	FPI Flows – IPOs	Overall FPI Flows	Cumulative FPI Flows
Year 2021	-7,070.50	+10,830.64	+3,760.14	+3,760.14
January 2022	-4,437.78	-22.04	-4,459.82	-4,459.82
February 2022	-5,144.48	+402.23	-4,742.25	-9,202.07
March 2022	-5,244.75	-140.19	-5384.94	-14,587.01
April 2022	-2,180.02	-56.21	-2,236.23	-16,823.24

Data Source: NSDL (all figures in $ million)

If you look at the cumulative FPI flows till Apr-22, outflows of $16.82 billion in the first 4 months of 2022 is a continuation of the FPI selling trend that started in October 2021. It has offset the overall inflows in 2021 by almost 4.5 times. Unlike in 2021, when FPIs were aggressively buying into IPOs, that trend is not yet visible in year 2022.

However, the LIC IPO could change that narrative to a great extent. For that we have to wait for the FPI participation in big ticket IPOs like LIC and Delhivery. That should make the story of FPI flows more palatable in the month of May 2022.