OTHER GROUP COMPANIES
market

What FIIs bought and sold in India in September 2022?

After infusing $634 million in July and $6.44 billion in August, FPIs were back to selling ways in September 2022.

October 10, 2022 6:25 IST | India Infoline News Service
For the month of September 2022, the FPIs turned in a rather disappointing show. After infusing $634 million in July and $6.44 billion in August, FPIs were back to selling ways in September 2022. Remember, FPIs had sold equities worth $34 billion in India between October 2021 and June 2022. September was specifically disappointing as the entire selling by FPIs happened in the second half. In the first half of September 2022, FPIs were net buyers of $1.60 billion while they were net sellers of -$2.50 billion in the second half. For September 2022 as a whole, FPIs were net sellers in equities worth $894 million.

The impact of the market sell-off was also visible in the Assets under Custody (AUC) of the FPIs. The AUC of FPIs had fallen from $667 billion in October 2021 to $523 billion at the end of June 2022. In July 2022, the AUC had picked up to $569 billion and further to $601 billion in August 2022 on the back of aggressive FPI buying and buoyant markets. September 2022 was marked by a sharp FPI sell-off and index correction as FPI AUC fell back to $566 billion.

The month of September 2022 had just 2 IPOs of Harsha Engineers and Tamilnad Mercantile Bank, so even IPO support to FPI flows was limited. Here is the AUC standing, sector-wise.

Industry
Group
Assets Under Custody (AUC)
of FPIs - $ Billion (Sep 2022)
Financials 178.94
Oil & Gas 63.07
IT Services 58.34
FMCG 39.63
Automobiles 31.87
Power 28.72
Healthcare and Pharma 27.67
Consumer Durables 21.74
Metals & Mining 18.03
Telecom 15.50
Capital Goods 14.64
Consumer Services 14.60
Chemicals 12.58
Top 13 Sectors 525.33
Other 10 sectors 40.23
Total FPI AUC 565.56
Data Source: NSDL
 
Here is how the AUC mix looks like in September 2022

The table above captures the top 13 sectors with AUC more than $10 billion. NSDL has modulated the list from 40 sectors to 23 sectors. Out of these 23 sectors that FPIs invest in, AUC of the top-13 sectors accounted for 92.89% of total FPI AUC of $565.56 billion. The September 2022 AUC at $565.56 billion is down -5.95% compared to the August 2022 AUC. However, since the peak of October 2021, the FPI AUC is down -15.21%.

How does the sectoral mix of AUC stack up? Financials, comprising banks, NBFCs and insurance accounted for 31.64% of overall FPI AUC, corresponding to their weight in Nifty. The other significant AUC contributors were Oil & Gas $63.07 billion, Information Technology $58.34 billion, FMCG $39.63 billion, Automobiles $31.87 billion, Power $28.72 billion, Healthcare $27.67 billion and Consumer durables $21.74 billion. If you look at change in FPI exposure to sectors from the peak, the biggest depletion has happened in the IT sector followed by the banking and financial sector. IT sector alone accounted for more than 40% of the total FPI AUC depletion in India.

The immediate challenge to FPI flow sentiments would come from the non-inclusion of Indian debt paper in the global benchmark bond indices like JP Morgan and FT Russell. That rules out $40 billion of FPI debt flows into India.

FPIs and the sectoral buying story of September 2022

Data Source: NSDL

How were the FPI flows sector-wise in September 2022? Despite net selling of $894 million, there were enough sectors that saw net buying. Out of the 23 sectors where FPI flows are tracked by NSDL, FPIs were net sellers in 9 sectors in September 2022,neutral on 1 sector and buyers in 13 sectors. Clearly, selling has been concentrated in a handful of sectors only.

The buying was strongest in FMCG at $345 million and Telecom at $307 million. The reasons are not far to seek. Most FPIs are looking at telecom as a digital play on the limitless prospects of 5G. FMCG is not just defensive but is likely to gain the most by not passing on the fall in input costs to customers. Consumer services and capital goods saw buying of $301 million and $244 million respectively on major bets on infrastructure inputs. Other sectors that saw buying were healthcare, construction and auto.

FPI selling in September 2022 was focused on IT and commodities

The FPI selling story of September 2022 was concentrated on the IT sector and to lesser extent on oil & gas and metals. The IT sector saw net selling of $1,140 million. This was after concerns expressed over top line growth amidst falling IT spending. A series of IT downgrades combined with IT layoffs put off FPIs in a big way. While oil & gas saw selling of $542 million, it was $366 million for metals. Falling crude prices went against the upstream oil players. Downstream players are under pressure due to lower GRMs and negative marketing margins.
For metals, it is a double whammy with lower price realizations and rising cost of ores, coking coal, power and freight.

With RBI hiking rates by 50 bps and Fed by 75 bps, rate sensitives like banks, NBFCs and realty sold off. Power, cement and chemicals were the other sectors to witness selling in the month. FPIs are wary of globally vulnerable stories and prefer pure domestic plays.

FPI flows into IPOs and secondary markets in calendar 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
March 2022 -5,244.75 -140.19 -5384.94 -14,587.01
April 2022 -2,180.02 -56.21 -2,236.23 -16,823.24
May 2022 -5,860.97 +682.78 -5,178.19 -22,001.43
June 2022 -6,429.51 -7.09 -6,436.60 -28,438.03
July 2022 -4.58 +622.63 +618.05 -27,819.98
August 2022 +5,949.25 492.70 +6,441.95 -21,377.05
September 2022 -904.25 +1.17 -903.08 -22,280.13
Data Source: NSDL (all figures in $ million)

If you look at the cumulative FPI flows for the first 9 months of calendar 2022, the net outflows of $22.28 billion is still intimidating. The month of September was disappointing because the selling by the FPIs came after 2 consecutive months of net buying by FPIs and despite being decisive net buyers in the first half of September.

Going ahead, several factors would be an overhang on FPI flows. Firstly, there have been a series of downgrades of Indian equities after the market strength in 2022. Secondly, the Fed has hinted at another 75 bps rate hike in November and that should work against the globally impacted businesses. Thirdly, rupee is now at 82.40/$ and that would not give too much comfort to the FPIs. Last, but not the least, the Q2FY23 earnings season which has just started will be the real fundamental story that FPIs will focus on. FPI flows over the next few months would be interesting and critical!


Invest wise with Expert advice

FEATURED ARTICLE

BLOGS

Open Demat Account

Invest wise with Expert advice

By continuing, I accept the Terms & Conditions and agree to receive updates on Whatsapp