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What FIIs bought and sold in India in November 2021?

Foreign Portfolio Investors were heavy net sellers in Oct-21 and Nov-21 selling was relatively lower in comparison. For example, FPIs infused $1.74 billion in Sep-21, net sold $1.74 billion from equities in Oct-21 and have now net sold $795 million in Nov-21.

December 07, 2021 10:09 IST | India Infoline News Service
Foreign Portfolio Investors were heavy net sellers in Oct-21 and Nov-21 selling was relatively lower in comparison. For example, FPIs infused $1.74 billion in Sep-21, net sold $1.74 billion from equities in Oct-21 and have now net sold $795 million in Nov-21. There were several reasons for the selling in October and November like input cost inflation, likely Fed taper, valuation concerns etc.

But the real story of November FPI action is visible, as we shall see later, in the break-up of flows between IPO flows and secondary market action. While FPIs were enthusiastic about IPOs, they were aggressive sellers in the secondary markets. During Nov-21, the FPI sold $302 million in the first half and $493 million in the second half of the month.

But, first a look at how the equity Assets Under Custody (AUC) of the foreign portfolio investors (FPIs) stands at the close of Nov-21.

Data Source: NSDL

The chart covers the top 16 sectors where AUC is above $10 billion. Out of 40 sectors that FPIs invest in, AUC of these 16 sectors account for 91.91% of the total AUC of $639 billion. The AUC has fallen from $660 billion at close of Oct-21 to $639 billion at close of Nov-21 due to the dual impact of lower price levels and selling in sectors like banking where AUC has compressed sharply.

Financials, comprising of banks, NBFCs and insurance. account for 32.8% of total FPI AUC. The other significant AUC contributors are IT at $91.11 billion, Oil & Gas $63.88 billion, FMCG $37.76 billion, Healthcare $32.23 billion and automobiles $25.71 billion.

Banks saw the sharpest sequential fall of $12 billion in AUC while autos and FMCG also saw loss in AUC. The two sectors to move up in AUC rankings were IT and retail. While IT AUC was driven by IT outperforming the Nifty in November, the retail surge in AUC was driven by huge flows into Paytm and Nykaa IPOs. AUC has fallen for 2 months in succession.

What sectors did FPIs buy into in Nov-21

FPIs withdrew $795 million from Indian equities in Nov-21, which is lower in net intensity compared to Oct-21. Here is a pictorial summary of sectoral flows in Nov-21.

Data Source: NSDL

While net flows were negative, the sector-wise performance was quite disparate. Let us look at inflows. Retail sector got FPI inflows of $3.00 billion largely on IPO flows into catalogue retail plays like Paytm and Nykaa. Interestingly, realty saw inflows of $524 million while hotels and QSR got inflows of $208 million. Flows into these sector were a lot more stock specific. Textiles and telecom were two other sectors to get minor inflows.

Sectors that FPIs sold into in Nov-21

The selling in Nov-21 was dominated by banks with nearly $2.09 billion taken out on fears of an imminent rate hike by the Fed. There were also fears that the Omnicron virus could hit the asset quality of banks. FMCG sector also saw outflows of $578 million as FPIs were concerned about the impact of rising input costs.

Among other major sectors to sell-off, oil & gas saw outflows of $519 million as oil prices went into a free fall of 13% in a single day on virus fears. The decision to release oil from the strategic petroleum reserves also spooked oil prices. In addition, metals saw outflows of $410 million, IT $366 million, automobiles $162 million and cement $143 million.

Metals and IT were hit by weak global demand concerns. While automobiles were hit by the consistent microchip shortage, cement was a victim of input cost spike. IT also saw selling, although the AUC of IT went up due to domestic accumulation in IT.
IPO versus Secondary Market flows of FPIs in CY 2021

Calendar Year
2021
FPI Flows -
Secondary Markets
FPI Flows -
IPOs
Overall
FPI Flows
Cumulative
FPI Flows
Jan-21 2,731.61 -73.49 2,658.12 2,658.12
Feb-21 2,958.68 580.15 3,538.83 6,196.95
Mar-21 491.62 952.58 1,444.20 7,641.15
Apr-21 -1,302.57 8.65 -1,293.92 6,347.23
May-21 -932.25 543.52 -388.73 5,958.50
Jun-21 1,327.39 1,033.32 2,360.71 8,319.21
Jul-21 -2,342.77 829.97 -1,512.80 6,806.41
Aug-21 -817.98 1,102.00 284.02 7,090.43
Sep-21 1.616.51 175.70 1,792.21 8,882.64
Oct-21 -1,931.62 124.24 -1807.38 7,075.26
Nov-21 -4,535.99 3,745.65 -790.34 6,284.92
Data Source: NSDL (all figures in $ million)

While IPOs played a major role in FPI inflows in the months of March, June and August, the contribution of IPOs was more subdued in Sep-21 and Oct-21. However, FPI IPO flows were back with a bang in Nov-21, thanks to Paytm and Nykaa IPOs.

Let us look at the cumulative flows of FPIs into Indian equities in the first 11 months of calendar year 2021. FPIs infused $6.28 billion into equities in the first 11 months of calendar year 2021. However, out of this figure, $9.02 billion has come through IPOs and (2.74 billion) were the net outflows from secondary markets in the first 11 months of the year.

If you look at FY22 starting April, the overall flows have been negative. With the Omnicron virus, valuation concerns and the Fed hawkishness, there are enough headwinds to FPI flows in the coming months.

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