What FIIs bought and sold in India in April 2023?

5 May 2023 , 10:31 AM

The inflows combined with the surge in the markets ensured that the assets under custody (AUC) of the FPIs were up over 5% in the month of April 2023. However, this enthusiasm must be seen in a larger perspective. Between October 2021 and June 2022, the FPIs took out $34 billion from Indian equities. This was followed by $12 billion of infusion in the second half of calendar 2022. However, FPIs were once again net sellers in January 2023 and February 2023. The month of March was positive largely due to the $1.9 billion infusion by GQG Fund into the Adani group stocks. In that context, April 2023 saw genuine FPI flows. It remains to be seen if this trend can be sustained.

Sector-wise assets under custody (AUC) story for April 2023?

Assets under custody (AUC) is the closing market value of all the equities held by FPIs. The value of AUC depends partially on FPI flows and partially on stock market performance. It may be recollected that the AUC of FPIs had peaked at $667 billion in October 2021. From that point, the AUC of FPIs fell to as low as $523 billion by June 2022. After bouncing back to $611 billion in November 2022, the FPIs AUC has been on a consistently volatile trend and now stands at $571 billion as of the close of April 2023. Here is the April 2023 picture of FPI AUC along with a comparison with the previous month.

Industry  Group	FPI AUC (Apr 2023) ($ billion)	FPI AUC (Mar 2023) ($ billion)
Financials (BFSI)	195.12	181.94
Oil & Gas	57.50	54.80
Information Technology (IT) Services	56.52	59.52
Fast Moving Consumer Goods (FMCG_	42.06	40.47
Automobiles and Auto Components	33.57	30.77
Healthcare and Pharmaceuticals	28.42	26.83
Power (generation and transmission)	19.19	18.14
Consumer Durables	18.74	18.09
Capital Goods	17.73	16.60
Metals and Mining	17.47	15.88
Telecommunications	14.58	13.61
Consumer Services	13.52	12.58
Chemicals	12.28	11.48
Construction	10.96	10.24
Cement	10.21	10.25
Services	10.04	9.72
Top 14 Sectors	557.89	N.A.
Other 9 sectors	13.23	N.A.
Total FPI AUC	571.12	542.29

Data Source: NSDL

The table above captures the top 16 sectors with AUC above $10 billion as of April 2023. NSDL has pruned the list from 40 sectors to 23 sectors. Out of these 23 sectors that FPIs invested in, AUC of the top-16 sectors accounted for 97.68% of total FPI AUC of $571.12 billion. The April 2023 AUC at $571.12 billion is up 5.32% compared to March 2023, which is not surprising considering the relentless rally in the Nifty during the month. The big highlight of the month was that FPI AUC of the IT sector fell below that of the oil & gas sector.

The BFSI space, comprising of banks, NBFCs and insurance accounted for 34.16% of overall FPI AUC. In absolute terms, there has been accretion in AUC across sectors, except for the IT sector which continues to see loss of AUC. For instance, the BFSI sector managed to improve its overall AUC substantially above the $195 billion mark. Among solid gainers in AUC for the month of March 2023 were oil & gas, automobiles FMCG, metals and power. Among the sectors that saw depletion in AUC was the IT sector.

Apart from BFSI, the other significant AUC contributors were oil & gas $57.50 billion, information technology (IT) $56.52 billion, FMCG $42.06 billion, Automobiles $33.57 billion, Healthcare $28.42 billion, and Power $19.19 billion. As stated earlier, the selling by FPIs in the IT sector has been persistent as a result of which the FPI AUC of the IT sector has fallen the AUC of the oil sector after a very long gap.

Financials see buying, IT continues to sell off in April 2023

Where FPI money flowed in	Where FPI money flowed out
Sector	Amount ($ million)	Sector	Amount ($ million)
Financials (BFSI)	+939	Information Technology	-601
Automobiles	+243	Media & Entertainment	-27
Capital Goods	+197	Realty	-26
Metals & Mining	+173	Consumer Durables	-22
FMCG	+140

Data Source: NSDL

Let us first focus on sectors getting positive flows from FPIs in April 2023. Once again, it was the Financial Services, comprising of banks, NBFCs and insurance, that led the way with $939 million of inflows. This was followed by automobile sector inflows at $243 million. Other sectors to see consistent inflows were Capital goods at $197 million, metals & mining at $173 million and FMCG at $140 million.

The only sector that saw heavy selling of $601 million during the month of April 2023 was the IT sector. This got accentuated after the weaker than expected guidance by IT companies like Infosys and HCL Technologies while announcing their Q4FY23 results along with annual FY23 numbers.

What were the triggers for sectoral FPI churn in April 2023

Buying in financial services was an obvious corollary to the RBI decision to hold repo rates at 6.5% in the April MPC meet. This was contrary to expectations and also contrary to the signals coming from the US Fed. However, the RBI opted to bite the bullet and maintained status quo on rates. Banks were already attracting interest due to persistent expansion in their net interest margins (NIMs) in the last 3 quarters. This was due to the deposit rates not going up in tandem with the lending rates, leaving banks with a profitable lag. 

However, the RBI decision to hold rates resulted in flows into other rate sensitives like NBFCs and auto stocks too. On the sell side, IT has been a story oft repeated. It is facing headwinds like slowing tech spending, pricing pressures as well as pressure on operating margins. FPIs have been consistently winding down their IT exposure in India, to the extent that the FPI AUC in IT has not fallen below that of oil & gas.

A quick look at FPI flows break-up in April 2023

Here is how the FPI flows in April 2023 and on a cumulative basis looked like.

Calendar  Month	FPI Flows Secondary	FPI Flows Primary	FPI Flows Equity	FPI Flows Debt/Hybrid	Overall FPI Flows
Full Year 2022	(146,048.38)	24,608.94	(121,439.44)	(11,375.78)	(132,815.22)
January 2023	(29,043.32)	191.30	(28,852.02)	2,308.27	(26,543.75)
February 2023	(5,583.16)	288.85	(5,294.31)	1,155.19	(4,139.12)
March 2023	7,109.65	825.98	7,935.63	-2,036.42	5,899.21
April 2023	9,792.47	1,838.35	11,630.82	1,913.97	13,544.79
Total for 2023	(17,724.36)	3,144.48	(14,579.88)	3,341.01	(11,238.87)

Data Source: NSDL (all figures are Rupees in crore). Negative figures in brackets

What are the key takeaways from the month-wise FPI numbers for April 2023. Firstly, if we compare CY22 and CY23, the big difference is the IPO flows. The big IPOs are missing in 2023 and that means even the big FPI bets on IPOs are missing. More importantly, the FPI selling pressure is coming from relatively unfavourable macros and global headwinds, which is unlikely to change in a hurry. That includes a mix of global and domestic macros.

What are these macros? At a global level, Fed hawkishness, fears of global recession and the evolving developing banking crisis are likely to keep FPIs on tenterhooks. For instance, even in the May 2023 policy, the Fed has raised rates by another 25 bps, even as more mid-sized banks are on the brink in the US. At a domestic level, the real challenges lie in persistent consumer inflation, which refuses to come down despite 250 bps of rate hikes. Above all, the Indian corporates are feeling the pinch of rising input costs, weaker rural sales, and higher interest costs. FPIs will have some tough choices to make on the India story.