What FIIs bought and sold in India in June 2023?

6 Jul 2023 , 07:08 AM

In just 2 months viz. May and June, the FPIs have infused over  $11 billion into Indian equities. The icing on the cake is that they have infused another $2 billion into debt. The month of July has  begun on a strong note with the FPIs infusing more than $2 billion just in the first 3 days of the month. It looks like the FPIs are back with a bang in the Indian markets. But, what has triggered such massive flows into Indian equity markets from the FPIs? Actually, there are a mix of several factors here.

To begin with, the FPI flows were fairly impressed with the current account deficit for the March 2023 quarter coming in at just about 0.2% of GDP. Even for the full year FY23, the CAD stood at 2% of GDP, which is sharply lower than the previous estimates of 4% of GDP as envisaged in the middle of the fiscal year FY23. The second factor is the US GDP coming much higher than expected for the first quarter at 2%, which is an upgrade of 70 bps over the second estimate. That goes to show that the recession fears are being largely belied. Thirdly, the merger of HDFC Ltd and HDFC Bank also created enthusiasm over the BFSI sector in India as well as buying in possible index inclusions. To top it all, the stable rupee and the positive real interest rates also helped FPI flows into equity and also into debt.

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

Assets under custody (AUC) is the closing market value of all the equities held by FPIs. Between May 2023 and June 2023, the AUC has risen 6.12%. The AUC value depends partially on FPI flows and partially on stock market performance, and both have been robust in the month of June 2023, so it has been a double blessing for FPI AUC in the month. However, at $626 billion, the FPI AUC is still well below the peak of $667 billion recorded in October 2021. Of course, from that point, the FPI AUC fell to a low of $523 billion in June 2022. So, the bounce from lower levels has surely been appreciable.

Industry  Group	FPI AUC (Jun 2023) ($ billion)	FPI AUC (May 2023) ($ billion)
Financials (BFSI)	211.35	199.12
Information Technology (IT) Services	59.59	59.01
Oil & Gas	59.35	57.63
Fast Moving Consumer Goods (FMCG)	46.30	44.78
Automobiles and Auto Components	40.52	37.09
Healthcare and Pharmaceuticals	32.97	29.68
Capital Goods	22.08	19.39
Consumer Durables	21.82	20.14
Power (generation and transmission)	19.79	18.39
Metals and Mining	19.04	18.17
Telecommunications	16.28	15.42
Consumer Services	15.97	14.59
Chemicals	12.32	12.23
Construction	11.80	10.20
Cement	11.23	10.66
Services	11.06	10.59
Top 16 Sectors	611.47	577.09
Other 7 sectors	14.86	13.11
Total FPI AUC	626.33	590.20

Data Source: NSDL

The table above captures the top 16 sectors with AUC above $10 billion as of the close of June 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 97.63% of total FPI AUC of $626.33 billion. The June 2023 AUC at $626.33 billion is up 6.12% compared to May 2023 and over 10% compared to April 2023. That is hardly surprising considering the relentless flow of FPI buying in equities during the last 2 months. The interesting sidelight of the month was that FPI AUC of the IT sector once again bounced back to second place, although the FPIs continued to be net sellers in the Indian IT sector once again.

The BFSI space, comprising of banks, NBFCs and insurance accounted for 33.74% of overall FPI AUC. In absolute terms, there has been accretion in AUC across sectors with most of the AUC accretion coming from sectors like BFSI, automobiles, healthcare, and capital goods. BFSI sector managed to improve its overall AUC decisively above the $200 billion mark. If you look at the way sectors like capital goods, cement and construction have been adding AUC, it surely looks like a case of markets betting on a strong revival of the capital investment cycle.

FPIs buy BFSI, Autos in June 2023, but sell IT stocks

Here is a sectoral break-up of the FPI flows into Indian equities in the month of June 2023

Where FPI money flowed in	Where FPI money flowed out
Sector	Amount ($ million)	Sector	Amount ($ million)
Financials (BFSI)	+2,343	Information Technology	-408
Automobiles	+709	Services	-151
Capital Goods	+678	Oil & Gas	-71
Consumer Durables	+458	Media, Entertainment	-35
Construction	+352	Chemicals	-29
Power	+320
Consumer Services	+280
FMCG	+239

Data Source: NSDL

Let us first focus on sectors getting positive flows from FPIs in June 2023. Once again, it was the Financial Services, comprising of banks, NBFCs and insurance, that led the way with $2,343 million of inflows. This is the second month in a row that FPIs have infused more than $2 billion into the BFSI space. This was followed by automobile sector inflows at $709 million. Other sectors to see strong inflows were Capital Goods at $678 million, Consumer Durables at $458 million, Construction at $352 million and Power at $320 million. 

The sectors that saw FPI selling in June 2023 were IT, media, and oil & gas. However, in a month when FPI net inflows were to the tune of $5.50 billion, IT continued to attract selling as FPIs continued to remain cautious about tech spending and order pricing. Overall, the FPI bet is on the India centric story, while they have been cautious about the global stories.

What triggered the FPI flows into sectors in June 2023

To begin with, it was a macro buying so the sectors with high weightage (barring IT) saw the bulk of the buying. Also, there was index buying due to passive flows building up during the month of Jun3 2023. Buying in financial services was an obvious corollary to the RBI holding repo rates at 6.5% for the second time in a row in June. There are also triggers from falling CAD and higher US GDP projections. Banks are the obvious proxy for the India story and that is where the maximum action was visible. Other sectors that attracted FPI inflows included; automobiles and ancillaries which saw buying on the back of sustained order flows, overflowing order book positions and sharp reduction in operating and manufacturing costs. 

There was a smart bet on revival of capital cycle. If you look at the 3 sensitive sectors like capital goods, construction and Power, these sectors saw overall inflows of $1.35 billion on a net basis. FMCG stocks also attracted FPI flows in the month of June 2023 after better than expected results from major FMCG players. The FMCG companies gained from higher rural sales as well as from lower costs of oil related inputs and agricultural inputs. 

A glance at overall FPI flows break-up in June 2023

Here is how the FPI flows in June 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
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 #	14,082.84	2,738.55	16,821.39	-1,653.98	15,167.41
Total for 2023	80,188.30	13,039.66	93,227.96	15,287.83	1,08,515.79
# – July Data is up to 05th July only

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

The above table best sums up the story of FPI flows in June 2023 in particular and for calendar year 2023 in general. In the first half of 2023, FPIs have infused Rs93,228 crore into Indian equities while their total infusion into equity and debt combined was Rs108,516 crore. This is after offsetting the heavy selling by FPIs in January and February 2023. That is the real positive takeaway on the FPI flows front.