Under these conditions, heavy FPI selling was inevitable. In Jan-22, FPIs sold $4.46 billion of equities and there was additional selling of $4.71 billion in Feb-22. FPIs have already sold over $10 billion in 2022. In Feb-22, the selling was relentless in both halves of the month. If FPIs sold $1.70 billion in the first half, they sold equities worth $3.01 billion in the second half of Feb-22. Here is the breakup of Assets Under Custody (AUC) of foreign portfolio investors (FPIs) at the close of Feb-22.
Industry Group |
Assets Under Custody (AUC) of FPIs – $ Billion (Feb-22) |
Banks | 107.82 |
IT Services | 84.94 |
NBFCs | 74.75 |
Oil & Gas | 63.55 |
FMCG | 34.63 |
Pharma & Health | 28.03 |
Utilities | 25.93 |
Automobiles | 25.55 |
Capital Goods | 19.29 |
Consumers | 17.31 |
Metals | 15.25 |
Telecom | 14.41 |
Insurance | 12.75 |
Cement | 10.75 |
Retailing | 10.68 |
Chemicals | 10.20 |
Other 24 Industry Groups | 47.55 |
Total AUC | 603.39 |
Data Source: NSDL
How the FPI AUC sectoral mix changed in Feb-22
The table above covers the top 16 sectors where AUC is more than $10 billion. Out of 40 sectors that FPIs invest in, AUC of the top-16 sectors accounted for 92.12% of the total FPI AUC of $603.39 billion. The Feb-22 AUC at $603.39 billion is down 5.6% over Jan-22 and down 7.7% over Dec-21 levels. Financials and IT stocks took it on their chin in Feb-22.
Financials, comprising banks, NBFCs and insurance account for 32.37% of FPI AUC, which approximately matches with the weight of financials in the Nifty. The other significant AUC contributors are IT at $84.94 billion, Oil & Gas $63.55 billion, FMCG $34.63 billion, Healthcare $28.03 billion and automobiles $25.55 billion. The AUC depletion was limited in the case of healthcare sector and consumer durables sector.
The value depletion was visible in all the other sectors. Financials including banks, NBFCs and insurance led the fall in AUC. Even IT and FMCG AUC came under pressure during Feb-22 due to operating cost pressures. In the case of Oil & Gas, the AUC fell despite the spike in crude prices. Indian oil companies can only realize gains of steep crude prices up to a point; after that it becomes counterproductive. The only sector to see increase in AUC and better AUC rankings was metals. The metal stocks saw robust price performance as expected shortages drove up LME prices.
What sectors did FPIs buy into in Feb-22
FPIs sold $4.71 billion in Indian equities in Feb-22. This takes the total FPI selling in last 5 months to $14.33 billion on a net basis; after adjusting for the IPO inflows of FPIs.
Sectors that FPIs sold into in Feb-22
FPI selling in Jan-22 was again dominated by IT sector. IT stocks corrected sharply on OPM worries and fears of weak IT spending in FY23. FPIs sold $1,454 million worth of IT shares in Feb-22. Like in the previous month, FPIs were also heavy sellers in NBFCs, selling stocks worth $1,169 million. FPIs expect RBI to hike rates and that is not good news for NBFCs.
Oil & Gas saw FPI outflows of $498 million and insurance saw FPI outflows of $353 million in Feb-22. Despite higher crude prices, there are concerns that oil companies may be called upon to share part of the price burden. Also, with the worsening geopolitics, the operating risk is likely to increase for insurance companies. In addition, FMCG saw outflows of $299 million on operating cost worries. Automobiles saw FPI selling of $243 million on input cost and rate hike concerns. It was a double whammy for auto stocks.
Among other sectors to witness heavy FPI selling were Capital Goods ($188m), Banks ($159m), Cement ($153m), Chemicals ($140m) and Consumer Durables ($133m). Smaller sell-offs were seen in realty and media stocks. While realty was hit by rate concerns, media was about FPI selling in Zee. Like Jan-22, Feb-22 also was a tentative month for FPIs.
IPO versus Secondary Market flows of CY 2021 and 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 |
Data Source: NSDL (all figures in $ million)
If you look at the cumulative FPI flows till Feb-22, the outflows of $9.20 billion in the first two months of 2022 has offset the inflows of $3.76 billion in calendar year 2021, more than twice over. Unlike in CY2021, when FPIs were aggressively buying into IPOs, that trend is not yet visible in year 2022. A clearer picture should emerge once the IPO story picks up steam in 2022.
The entire scenario could change for the better once the LIC IPO dates are announced. It could trigger heavy inflows into India from foreign investors. But for that to happen, the geopolitical situation must normalize first. Till then pressure on flows is likely to continue.
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