Big bang buying seen from FPIs in August 2022

  • India Infoline News Service
  • 01 Sep , 2022
  • 6:52 AM
July net inflows from FPIs into Indian equities was positive but relatively tentative at $618 million. The August 2022 net inflows from FPIs rose 10-fold to $6.44 billion. This is all the more significant since FPIs had been net sellers for 9 consecutive months between October 2021 and June 2022. During the 9-month spell, FPIs took out nearly $33 billion from Indian equities with the sell-off sharpening since the start of calendar 2022. Whether this buying sustains remains to be seen, but the good news is that in August 2022, FPIs have been decisive net buyers in equity and also in debt.

The big FPI flow turnaround in August 2022

The table below captures monthly FPI flows since October 2021 with a break up of equity and debt flows. The equity flows includes secondary market and IPO flows too.

Month FPI - Equity FPI - Debt Net Flow Cumulative Flow
Oct-21 -13,549.67 1,272.16 -12,277.51 -12,277.51
Nov-21 -5,945.10 3,448.49 -2,496.61 -14,774.12
Dec-21 -19,026.06 -10,407.62 -29,433.68 -44,207.80
Jan-22 -33,303.45 3,080.26 -30,223.19 -74,430.99
Feb-22 -35,591.98 -2,586.30 -38,178.28 -1,12,609.27
Mar-22 -41,123.14 -8,876.35 -49,999.49 -1,62,608.76
Apr-22 -17,143.75 -5,613.91 -22,757.66 -1,85,366.42
May-22 -39,993.22 3,537.04 -36,456.18 -2,21,822.60
Jun-22 -50,202.81 -1,327.34 -51,530.15 -2,73,352.75
Jul-22 +4,988.79 -2,840.97 +2,147.82 -2,71,204.93
Aug-22 +51,204.42 +6,841.71 58,046.13 -2,13,158.80
Grand Total -1,99,685.97 -13,472.83 -2,13,158.80
Data Source: NSDL (all figures are Rupees in crore)

If July 2022 was a sampler of FPI buying then August 2022 was over 10 times that figure. In fact, the total buying in the month of August 2022 was more than the total FPI outflow in the month of June 2022. Here are some key takeaways.

·         After 9 months of persistent selling, the tide had turned in July 2022 but the trend of FPIs turning risk-on once again was confirmed unambiguously only in August 2022.

·         In August, the FPIs not only infused over $6.44 billion into equities, but also brought in close to $800 million into Indian debt paper, largely an affirmation of faith in net yield spreads and on rupee strength.

·         It may be recollected that the FPI holdings in Indian equities had fallen from $675 billion to $530 billion. That did bounce back in July quite sharply and in the month of August the net holding of FPIs in Indian equities should have bounced further.

·         One of the key sentiment defining moments of the month was the rupee taking support around 80/$ levels.

While uncertainties over the global rates trajectory and commodity inflation are still rampant, what has changed is the perception of FPIs. They seem to be getting more risk-on in their approach to investing.

What triggered the massive FPI buying in August 2022?

One big change is that the FPIs are looking at emerging markets more favourably. India, which is likely to be the high growth story for 2022 and 2023, is an obvious choice for FPI investing. Here are key factors that triggered a shift in FPI sentiments in August 2022.

a)      The biggest reason for the FPI selling was not just Fed hawkishness but uncertainty about the terminal Fed rates. That is now largely settled with even the Fed confirming that they would be largely done with their rate hikes by end of 2022. That implies a terminal rate in the US of 3.75% to 4.00%. Correspondingly, even the RBI is likely to settle for a terminal repo rate of around 6.25% to 6.50%. That kind of clarity gives a lot more comfort to the FPIs since it can be factored into their calculations.

b)      Inflation may not have fallen a great deal but the trend is headed down. In the US, consumer inflation is down to 8.5% and Powell has affirmed at Jackson Hole that there would be no relenting till inflation touched 2%. In India, the CPI inflation may have fallen just over 100 bps but the WPI inflation is down close to 275 bps. More importantly, the inflation expectations have been managed by central banks very effectively. That gives confidence to the FPIs that real returns would eventually be protected.

c)      Risk-off investing looks good as a concept but there is a more practical side to it. Investors just cannot go on buying treasuries of developed economies at low rates or zero yields. That will hardly help fill the huge gap in pension liabilities of fund managers. Risk-on has to come back sooner rather than later.

d)      In a sense, the RBI has hit two birds with one stone on the currency front. It did allow the rupee to weaken and find its level. However, it has defended the Rs80/$ level quite strongly. That now gives confidence to the FPIs that a strong to stable rupee would be instrumental in protecting their dollar returns; favouring FPI flows.

Let us now look at what could be risks to the August FPI flow story.

FPI flows impressed in August 2022, but risks persist

The table below gives a more granular encapsulatoin of the daily flows into Indian equities in the month of August, both in rupee and dollar terms.

Date Net equity
flows (Rs cr)
Cumulative equity
flows (Rs cr)
Net equity
flows ($ Mn)
Cumulative equity
flows ($ Mn)
01-Aug-22 1,470.17 1,470.17 185.11 185.11
02-Aug-22 5,346.90 6,817.07 675.38 860.49
03-Aug-22 1,662.52 8,479.59 211.49 1,071.98
04-Aug-22 3,967.58 12,447.17 503.23 1,575.21
05-Aug-22 1,728.12 14,175.29 217.26 1,792.47
08-Aug-22 1,999.91 16,175.20 252.79 2,045.26
10-Aug-22 1,573.51 17,748.71 197.73 2,242.99
11-Aug-22 2,454.99 20,203.70 308.80 2,551.79
12-Aug-22 2,248.85 22,452.55 282.92 2,834.71
17-Aug-22 14,263.35 36,715.90 1,789.60 4,624.31
18-Aug-22 4,308.13 41,024.03 542.35 5,166.66
19-Aug-22 3,457.21 44,481.24 433.96 5,600.62
22-Aug-22 1,532.00 46,013.24 192.09 5,792.71
23-Aug-22 -346.34 45,666.90 -43.36 5,749.35
24-Aug-22 1,057.65 46,724.55 132.39 5,881.74
25-Aug-22 168.05 46,892.60 21.06 5,902.80
26-Aug-22 2,361.17 49,253.77 295.63 6,198.43
29-Aug-22 -113.57 49,140.20 -14.21 6,184.22
30-Aug-22 2,064.22 51,204.42 257.73 6,441.95
Data Source: NSDL

What do we read from the table above. Barring a couple of days of marginal net selling in August, the FPIs have been decisively buying on
all the other days. That is evident from the $6.44 billion that was infused into Indian equities by FPIs in August 2022, nearly ten times the net inflows of July. But it is not going to be an easy game. Here are some key risks that still persist to FPI flows into Indian equities.

a)      As of now the assumption is that hawkishness will bring down inflation. The start is promising, but inflation may not fall hard due to the labour slack in the economy. This is true of the US and the Indian economies. That would impel the central banks to enhance their terminal rates. Since the neutral rate is already crossed, that could hit GDP growth.

b)      The second risk for India is the high current account deficit, which threatens to get closer to 4.5% to 5% of GDP in FY23. That never makes FPIs too comfortable and could turn sentiments quite rapidly.

For now it is, perhaps, time to celebrate the big FPI turnaround in August 2022!
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What FIIs bought and sold in India in January 2023?

  • 06 Feb , 2023
  • 7:54 AM
  • Year 2022 may have been a negative year overall for FPI flows, but the second half of 2022 had brought in some good tidings.

For instance, FPIs withdrew Rs1.21 trillion from Indian equities in calendar year 2022 overall. However, if you break up the year into two halves, H1-2022 saw net FPI selling of Rs2.17 trillion while H2-2022 saw net FPI buying of Rs0.96 trillion resulting in overall FPI selling in 2022 at Rs1.21 trillion. The months of November 2022 and December 2022 saw equity inflows of $4.45 billion and $1.35 billion respectively.

In comparison, the month of January 2023 was fairly disappointing. January 2023 saw total FPI selling of $3.54 billion. The selling was evenly distributed through the month with the first half of the month seeing FPI selling of $1.85 billion and the second half seeing FPI selling of $1.69 billion. This is almost reminiscent of the period between October 2021 and June 2022; when the FPIs had withdrawn $34 billion from Indian equities. Whether January 2023 sets the trend for calendar 2023 or whether we see a turnaround in FPI flows remains to be seen. But, first let us look at assets under custody of FPIs.

How does assets under custody (AUC) look sector-wise?

It must be remembered that the assets under custody (AUC) is the closing market value of all the equities held by the FPIs. That means, AUC is a function of flows and also stock market performance. The AUC of FPIs peaked at $667 billion in October 2021 and fell to as low as $523 billion in June 2022. Between June 2022 and November 2022, the AUC rallied by 16.8% to $611.11 billion; amidst positive inflows and a rally in the benchmark indices. The market correction in December 2022, took the AUC lower to $583.97 billion and as of the close of January 2023, the AUC has fallen further to $563.13 billion. FPI AUC is currently 15.6% below the peak. Here is the latest AUC standing, sector-wise for the FPIs.


Assets Under Custody (AUC) 
of FPIs - $ Billion (Jan 2023)

Financials (BFSI)185.01
Information Technology (IT) Services63.26
Oil & Gas59.62
Fast Moving Consumer Goods (FMCG_39.49
Automobiles and Auto Components 33.32
Healthcare and Pharmaceuticals27.81
Power (generation and transmission)20.89
Metals and Mining19.90
Consumer Durables18.27
Capital Goods16.00
Consumer Services12.77
Top 13 Sectors 522.25
Other 1 sectors40.88
Total FPI AUC563.13

Data Source: NSDL

The table above captures the top 13 sectors with AUC above $10 billion. NSDL has pruned the list from 40 sectors to 23 sectors. Out of these 23 sectors that FPIs invested in, AUC of the top-13 sectors accounted for 92.7% of total FPI AUC of $563.13 billion. The January 2023 AUC at $563.13 billion is down -3.57% compared to the sequential December 2022 AUC. 

The BFSI space, comprising of banks, NBFCs and insurance accounted for 32.85% of overall FPI AUC. That is also the approximate weight of BFSI in the Nifty. The other significant AUC contributors were Information Technology $63.26 billion, Oil & Gas $59.62 billion, FMCG $39.49 billion, Automobiles $33.32 billion, Healthcare $27.81 billion and Power $20.89 billion. While FMCG AUC was stable, the automobiles sector and the IT sector saw smart growth in AUC for the month of January 2023. 

FPI flows in January 2023 was deeply in the negative at $3.54 billion, with relentless selling in the first and the second half of the month. Let us now turn to the sectors that received positive flows in the month. Metals was a sector that saw net FPI inflows of $535 million in the January 2023. This was largely led by China exiting COVID curbs and the likelihood of a boost to Chinese economy translating into higher metal prices on the LME. The impact was already visible on the LME. The other two sectors to witness positive flows in January 2023 were automobiles and construction.

Construction companies are finally coming out of fairly prolonged curbs on contact intensive sectors. That is changing and the consumer demand for housing is picking up. That helped positive flows into the construction sector. The surprise package was the auto sector which saw good buying ahead of the demand numbers exceeding the supply, resulting in a bounce in the auto prices. Also, a lot of expectations were built around the budget giving support to EV, which eventually did materialize.

FPIs sell heavily into financials in January 2023

The BFSI sector comprising of banks, NBFCs and insurers saw bulk of the net outflows in the month of January with the BFSI sector alone seeing outflows of $1.86 billion. Other sectors that saw significant outflows included oil & gas at $931 million, Consume Durables at $340 million, Telecom $282 million,  IT sector $263 million and Consumer Services $191 million for the month of January 2023. FMCG and other miscellaneous services also witnessed selling. BFSI was a clear case of FPIs trimming their positions in NBFCs and insurance, where valuations have been steep for some time. The Adani saga only worsened the fall and the FPI selling in the market. 

Tracking FPI flows into India in year 2023

Calendar Year 
2021 and 2022

FPI Flows - 
Secondary Markets

FPI Flows - 

FPI Flows

FPI Flows

Year 2021





Year 2022





January 2023





Data Source: NSDL (all figures in $ million)

In our previous note, we had estimated a bounce back in FPI flows in 2023. However, the month of January has begun on a rough note with FPI selling of more than $3.50 billion. What exactly has forced this aggressive selling in equities by FPIs?

  • The concerns over central bank hawkishness are still prominent. Fed has reduced the pace of rate hikes, but it is not clear whether the Western economies would get into a full-fledge recession, in which case risk-off investing could be the narrative.

  • Indian Q3 results have shown a lot of pressure with margins still under strain due to higher input and operating costs. While banks continue to dominate the profit with solid growth in NII and NIMs, other sectors have borne the brunt.

  • With the Adani group having lost more than half of its market cap and the carnage far from over, that could be an overhang for FPI flows in the coming months. Most of the FPIs have been aggressive sellers in Adani group on negative news flows.

  • The last few months have seen valuation concerns expressed by the FPIs as many of them have been net buyers in Asia, especially  in countries like South Korea, Taiwan, Hong Kong and Indonesia. This reallocation also led to FPI outflows from India.

  • The one thing really spooking the FPIs is the elevated levels of inflation in India. That means the hawkishness in India could go on longer and the pressure on cost of funding will remain. That is putting pressure on FPI flows.

FPI selling pressure was palpable in January; and February has stared on a weak note. However, with 7% GDP growth, macros are surely favorable. The budget has been positive and state election triggers would hold the key in the short term.


FPI IPO flows helps October 2022 end on an even note

  • India Infoline News Service
  • 01 Nov , 2022
  • 12:00 PM
FPI flows have been highly volatile in the last few months. After FPIs sold close to $34 billion between October 2021 and June 2022, July 2022 offered a small turnaround. However, the big shift happened in August with FPIs infusing $6.44 billion into Indian equities. But, after two promising months, FPIs again ended up net sellers in the month of September 2022. In fact, FPIs were net buyers in the first 3 weeks of September but sold $2.3 billion of equities in the last week and ended as net sellers.

In the month of October 2022, the FPI flows were flat. However, two things stood out. Firstly, FPIs started out selling aggressively in equities but turned into net buyers in the second half. The second trend is more important. It marked the return of IPOs as an asset class as the FPIs showed a lot of enthusiasm in investing in the IPOs, both as anchor investors and as QIB investors. In fact, the positive flows into IPOs largely offset the outflows from secondary market equities. That makes the month of October 2022 special.

However, the IPO story only captures part of the reason for the shift. There are two other factors that led to a shift in sentiments. Firstly, Bloomberg has reported that India’s inflation may be overstated if the impact of the free food program is factored in. That would reduce the consumer inflation by about 1.5% and change the entire equation of real returns. The second big shift is on outsourcing. From Foxconn to TSMC to Airbus; they are looking at India as the next big story in outsourcing manufacturing. After all, this is their opportunity to diversify their supply chain dependence on China.

October 2022 FPI flows: Neutral on equities, sellers in debt

The table below captures monthly FPI flow trends in equity and debt since October 2021.

Month FPI - Equity FPI - Debt Net Flow Cumulative Flow
Oct-21 -13,549.67 1,272.16 -12,277.51 -12,277.51
Nov-21 -5,945.10 3,448.49 -2,496.61 -14,774.12
Dec-21 -19,026.06 -10,407.62 -29,433.68 -44,207.80
Jan-22 -33,303.45 3,080.26 -30,223.19 -74,430.99
Feb-22 -35,591.98 -2,586.30 -38,178.28 -1,12,609.27
Mar-22 -41,123.14 -8,876.35 -49,999.49 -1,62,608.76
Apr-22 -17,143.75 -5,613.91 -22,757.66 -1,85,366.42
May-22 -39,993.22 3,537.04 -36,456.18 -2,21,822.60
Jun-22 -50,202.81 -1,327.34 -51,530.15 -2,73,352.75
Jul-22 +4,988.79 -2,840.97 +2,147.82 -2,71,204.93
Aug-22 +51,204.42 +6,841.71 58,046.13 -2,13,158.80
Sep-22 -7,623.66 +2,556.67 -5,066.99 -2,18,225.79
Oct-22 -8.29 -2,770.66 -2,778.95 -2,21,004.74
Grand Total -2,07,317.92 -13,686.82 -2,21,004.74
Data Source: NSDL (all figures are Rupees in crore)

To begin with, the month of October 2022 was neutral in terms of FPI equity flows. That is much better than the disappointment of September, when FPIs sharply turned into net sellers in the last week of the month. Here are some key takeaways from FPI flows in the month of October 2022
  • The neutrality of FPI flows into equities was largely driven by IPO flows. The IPO market finally saw action in the month, but more importantly, there was genuine FPI interest in the QIB quota and also in the anchor allocation of IPOs. The IPO flows almost entirely neutralized the secondary market FPI outflows.
  • Debt markets continued to see outflows for two reasons. Firstly, the hawkish stance remains a concern for debt investors. Secondly, the non-inclusion of Indian bonds in the JP Morgan Global Bond indices resulted in a lot of hot money flowing out of debt.
  • While rate hikes in the US and Europe are still a concern, there is now an expectation that 5% would be the worst case scenario for Fed rates. Markets would now be concerned only if the rates go seriously beyond 5%, which looks unlikely at the moment.
The month of November and December would be critical for FPI flows as these months will see the big boost to Fed rates. It remains to be seen if it results in genuine outflows from emerging markets due to rate differentials.

Did FPI sentiments change for the better in October 2022?

That remains a million dollar question, but there are signals that some factors, short term and long term, may have worked in favour of FPI flows into India.
  1. Fed hawkishness is still a concern and that is not going away in a hurry. Now it is almost like a hawkishness pandemic with the US, UK and even the EU raising rates aggressively to contain inflation. However, there is also a gnawing realization that this has to end sooner rather than later, as growth concerns would have take precedence.
  2. In the Indian context, the Bloomberg report that inflation may have been overstated, helped the cause a bit. According to the report, Indian consumer inflation may have been overstated by 150 basis points due to the impact of the free food program not being factored in. Also Russian oil impact is not fully factored in. That could change the equation sharply in favour of Indian equities.
  3. Something is changing in the way the world is doing business as investors are increasingly looking at India as a manufacturing hub. In the last few months there have been a slew of deals in sectors ranging from microchips to aerospace. That is likely to be a new theme that could provide the growth bandwidth to the Indian economy.
Story of FPI equity flow trend in October 2022

The table below gives a granular encapsulation of the daily flows into Indian equities in the month of October 2022; both in rupee and dollar terms.

FPI Flow
FPI Flows
(Rs Crore)
Cumulative flows
(Rs Crore)
FPI Flow
($ billion)
Cumulative flow
($ billion)
03-Oct-22 -1,522.48 -1,522.48 -186.69 -186.69
04-Oct-22 1,277.60 -244.88 156.30 -30.39
06-Oct-22 1,936.08 1,691.20 237.77 207.38
07-Oct-22 749.29 2,440.49 91.71 299.09
10-Oct-22 -3,908.08 -1,467.59 -474.28 -175.19
11-Oct-22 -765.05 -2,232.64 -92.84 -268.03
12-Oct-22 -3,761.17 -5,993.81 -456.50 -724.53
13-Oct-22 -357.26 -6,351.07 -43.44 -767.97
14-Oct-22 -1,106.63 -7,457.70 -134.29 -902.26
17-Oct-22 -515.40 -7,973.10 -62.55 -964.81
18-Oct-22 -184.04 -8,157.14 -22.33 -987.14
19-Oct-22 858.06 -7,299.08 104.35 -882.79
20-Oct-22 -380.63 -7,679.71 -46.21 -929.00
21-Oct-22 1,687.32 -5,992.39 202.79 -726.21
25-Oct-22 576.37 -5,416.02 69.56 -656.65
27-Oct-22 331.05 -5,084.97 40.00 -616.65
28-Oct-22 3,498.91 -1,586.06 424.68 -191.97
31-Oct-22 1,577.77 -8.29 191.45 -0.52
Data Source: NSDL

After a long and mixed month, the FPI flows were neutral for the month of October 2022 overall. However, if you look at the day-wise trend, the buying by the FPIs was a lot more prominent in the second half of the month. In fact, at one point the month selling stood at a negative $1 billion, but a combination of block buying by FPIs and IPO participation as anchors helped close the month of October on absolute neutral grounds.

Is this an official indication that the flow challenges may have ended? It would slightly premature, because a lot will depend on the Fed statement late on 02nd November and the follow up meeting of the RBI MPC on 03rd November. These two meetings would actually decide on the rate differentials between India and the US and push FPI flows accordingly. For now, despite concerns on the quarterly results and macros, there are some positive cues. Inflation may not be so high and the outsourcing story could be much bigger than what India originally envisaged. For now, the investors are betting that the outsourcing story could be a game changer for India. The next 2 months would be more crucial to the colour and trajectory of FPI flows.


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  • 06 February, 2023 |
  • 2:57 PM

Year 2022 may have been a negative year overall for FPI flows, but the second half of 2022 had brought in some good tidings.

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