In the last 45 days, the sentiments appear to have shifted from optimism to ambivalence to scepticism. The numbers say it all. After infusing $17 billion into Indian equities between May and July 2023, the foreign portfolio investors (FPIs) saw flows sobering to just about $1.48 billion in August. Now, the August 2023, FPI flows of Rs12,262 crore or $1.48 billion was not bad in isolation, but it was surely small compared to the average net inflow of $5.5 billion from FPIs in the months of May, June, and July 2023. Things dipped further into negative in the September month. In the week to September 15 2023, the FPIs were Rs566 crore or just about $123 million. Now that is a very small quantum of selling, but it still shows the change in sentiments. For the month of September so far, FPIs have been net sellers to the tune of Rs4,768 crore in equities or $573 million.
To be fair, the FPI outflows of $573 million is not really substantial if you look at the backdrop of $18.5 billion infused into Indian equities between May and August 2023. In the latest week to September 15, 2023, the FPI outflows from equities were to the tune of $123 million, which is lower than the outflow of $658 million in the previous week. However, the 3 weeks prior to that had still seen net FPI inflows into equities to the tune of $278 million, $617 million, and $641 million respectively. FPIs have also been ambivalent as the trajectory of the US rates is still not too clear and hence a lot will predicate on the outcome of the Fed meeting on September 19, 2023. The CME Fedwatch is giving a mixed picture most of the India macro data points are out this week. On the domestic macros front, there are concerns over the India inflation numbers, but the next few months will give clarity on which way the inflation is headed. In the latest week, FPIs were net sellers for 3 out of the 5 trading days and that shows negative sentiments building up.
What triggered the FPI selling in the week to September 15, 2023
If the month of August 2023 was tepid compared to the robust flows of May, June, and July; then September is seeing FPI selling pressure. It may still be too premature to call it selling pressure as September has just seen outflows of $573 million. That is still very small compared to the FPI inflows of $18.5 billion between May and August 2023. The FPIs were net sellers for the second week in succession, but the positive takeaway is that the FPIs were net buyers in debt. Here were 4 of the key drivers for FPI outflows during the week.
If August was the taming of the FPI bull, then September has shown genuine concerns in the nature and colour of FPI flows. For now, the impact is not being felt as domestic flows are filling the gap with panache. As markets trend higher and volatility climbs, such smugness may not really work. That is the challenge at this juncture.
Macro FPI flow picture up to September 15, 2023
The table captures monthly FPI flows into equity and debt for 2022 and 2023.
Calendar Month |
FPI Flows Secondary |
FPI Flows Primary |
FPI Flows Equity |
FPI Flows Debt/Hybrid |
Overall FPI Flows |
Calendar 2022 |
(146,048.38) |
24,608.94 |
(121,439.44) |
(11,375.78) |
(132,815.22) |
Jan-2023 |
(29,043.32) |
191.30 |
(28,852.02) |
2,308.27 |
(26,543.75) |
Feb-2023 |
(5,583.16) |
288.85 |
(5,294.31) |
1,155.19 |
(4,139.12) |
Mar-2023 |
7,109.65 |
825.98 |
7,935.63 |
-2,036.42 |
5,899.21 |
Apr-2023 |
9,792.47 |
1,838.35 |
11,630.82 |
1,913.97 |
13,544.79 |
May-2023 |
38,093.11 |
5,745.00 |
43,838.11 |
4,491.44 |
48,329.55 |
Jun-2023 |
45,736.71 |
1,411.63 |
47,148.34 |
9,109.36 |
56,257.70 |
Jul-2023 |
37,292.82 |
9,324.94 |
46,617.76 |
1,359.32 |
47,977.08 |
Aug-2023 |
9,232.57 |
3,029.71 |
12,262.28 |
6,075.54 |
18,337.82 |
Sep-2023 # |
-4,305.43 |
-462.69 |
–4,768.12 |
1,799.92 |
-2,968.20 |
Total for 2023 |
1,08,325.42 |
22,193.07 |
1,30,518.49 |
26,176.59 |
1,56,695.08 |
# – September Data is up to 08th September |
Data Source: NSDL (all figures are Rupees in crore). Negative figures in brackets
This is the longer term picture that we are talking about. The longer term FPI flows captured in the table above provide a much better perspective, apart from the very short term perspective. The longer term big picture is still robust. A quick glance at the above table would tell you that inflows into equities in 2023 have more than offset the outflows in 2022. Till date in 2023, the FPI inflows into equity stand at Rs1.31 trillion compared to outflows of Rs1.21 trillion in 2022. The story remains positive, even if you look at overall flows of equity and debt combined. Against net outflows of Rs1.33 trillion in 2022, the FPIs have infused Rs1.57 trillion into equity and debt combined till date in 2023. While there may be doubts about the short term view, the long term view still remains uplifting.
Daily FPI equity flows for last 4 rolling weeks
Each week we look at the last 4 rolling weeks data on FPI flows as it shows us a time series moving average of FPI flows. Check the table below for 4 weeks to September 15, 2023.
Date | FPI Flow (Rs Crore) | Cumulative flows | FPI Flow($ billion) | Cumulative flow |
21-Aug-23 |
574.85 |
574.85 |
69.19 |
69.19 |
22-Aug-23 |
-1,277.22 |
-702.37 |
-153.67 |
-84.48 |
23-Aug-23 |
-108.75 |
-811.12 |
-13.09 |
-97.57 |
24-Aug-23 |
901.63 |
90.51 |
108.73 |
11.16 |
25-Aug-23 |
2,205.79 |
2,296.30 |
267.20 |
278.36 |
28-Aug-23 |
-1,706.33 |
589.97 |
-206.45 |
71.91 |
29-Aug-23 |
2,476.01 |
3,065.98 |
299.71 |
371.62 |
30-Aug-23 |
792.77 |
3,858.75 |
95.92 |
467.54 |
31-Aug-23 |
9.86 |
3,868.61 |
1.19 |
468.73 |
01-Sep-23 |
1,258.56 |
5,127.17 |
152.23 |
620.96 |
04-Sep-23 |
1,778.00 |
6,905.17 |
215.09 |
836.05 |
05-Sep-23 |
-2,375.64 |
4,529.53 |
-287.13 |
548.92 |
06-Sep-23 |
-1,311.57 |
3,217.96 |
-158.13 |
390.79 |
07-Sep-23 |
-2,832.84 |
385.12 |
-340.94 |
49.85 |
08-Sep-23 |
-719.15 |
-334.03 |
-86.45 |
-36.60 |
11-Sep-23 |
-97.07 |
-431.10 |
-11.68 |
-48.28 |
12-Sep-23 |
1,466.70 |
1,035.60 |
176.96 |
128.68 |
13-Sep-23 |
-330.83 |
704.77 |
-39.87 |
88.81 |
14-Sep-23 |
-2,293.06 |
-1,588.29 |
-276.43 |
-187.62 |
15-Sep-23 |
688.78 |
-899.51 |
83.01 |
-104.61 |
Data Source: NSDL
The week to September 15, 2023 saw net FPI outflows of $68 million or Rs566 crore, really not much to worry about. That could be partially due to block selling by FPIs, but here is the bigger picture of intermediate FPI flows.
What will drive FPI flows in the coming weeks?
There will be 4 key drivers of FPI flows in the coming week to Septeber15, 2023.
In the last few months, the India trades of FPIs have focused more on the sectors benefiting from the revival of the capital cycle like power and capital goods. The next few weeks could be interesting in terms of the FPIs crystallize their view on Indian equities.
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