How FPIs took a macro view in June?
FY21 saw net FPI inflows of $37 billion and FY22 is just about positive at end of Q1. Some key trends were evident in Jun-21. Firstly, FPIs were aggressively buying into Indian equities even when they were selling in other Asian emerging markets like Taiwan and South Korea.
The value of FPI investments at the end of Jun-21 has fallen marginally to $592 billion from $596 billion at the end of May-21. However, with FPIs having infused just $206 billion into India since FY-2000 and taken out substantial sums of money since then, they have reasons to be pleased with the performance of their portfolios in India. The overall value may be down by about $4 billion MOM, but that is more due to the valuation loss in many stocks.
Sectors that FPIs bought into in June 2021
As we said earlier, in the month of June, the FPI infused $2.35 billion of which $2.24 billion was infused in the first half of June and just $0.11 billion in the second half. So, let us first look at the sectors that FPIs bought into.
The big sector in terms of inflows was the insurance sector which saw FPI inflows of $966 million. However, this was largely on account of many of the FPIs lapping up the stake that Standard Life sold in HDFC Life Insurance. That was the singular factor that triggered the huge buying by FPIs in the insurance sector. The other two sectors to see substantial inflows were auto and banking. Let us look at autos first.
The auto sector saw FPI inflows of $371 million in the month of June. That was hardly surprising as most of the global investors are betting on auto stocks as the best proxy to play the revival in the auto sector as well as the revenge buying that is expected across consumption sectors post COVID 2.0. Banks saw $341 million of inflows but there is an underlying trend to it. NBFCs saw inflows of $375 million while banks actually saw outflows of $34 million. In the case of banks, there was heavy selling in the second half of the month.
The other sectors that saw positive FPI inflows included consumer durables at $183 million and IT at $133 million. That was more of a de-risked defensive play by most of the FPIs. Other defensives that saw buying were textiles and pharma. Oil sector saw net positive flows on robust oil prices. After all, even the likes of Chris Wood are now positive on oil.
Sectors that FPIs sold into in June 2021
Let us now turn to the sectoral selling by the FPIs. The biggest selling happened in the utilities segment with about $591 million of selling in this segment. If you are wondering as to what is this massive selling in utilities, it largely refers to port services and transport. There was a good deal of selling in the Adani Group stocks, especially Adani Ports SEZ, which is classified as a utility company due to its predominantly port operations. The Adani group saw overall selling after reports appeared in the press about NSDL freezing the demat accounts of 3 FPIs with substantially large exposure to the Adani group. While the news reports were denied by the company and NSDL, the sentimental damage was done.
There were 3 other sectors that saw FPI selling in the month of Jun-21. Telecom saw about $51 million of net selling and that could be attributed to weak ARPUs and concerns over the viability of Vodafone Idea. FMCG saw selling of $61 million. Ironically, within FMCG the food companies saw selling of close to $146 million but this was partially tempered by the personal care companies seeing net inflows. Apart from these two sectors, media saw selling to the tune of $81 million as the prolonged lockdown put further pressure on media companies; both in terms of subscription and ad revenues. That, in a nutshell was the story of FPIs on the selling side.
Overall, with $2.35 billion of inflows, June was a positive month for FPI flows. July could throw up more interesting trends as the impact of Q1 results start getting factored in.