For instance, FPIs had sold Indian equities worth $3.54 billion in January 2023. In the month of February 2023, this was followed up with selling in equities to the tune of $647 million. Overall, the FPIs have already sold around $4.21 billion of Indian equities in the first two months of 2023. However, this trend is not isolated to 2023 alone. The FPI selling began as back as in October 2021 when the Nifty and the Sensex had peaked for the first time at an all-time high.
As inflation started rising and central banks threatened to turn hawkish, FPIs started turning risk off in the last quarter of 2021. Between October 2021 and June 2022, the foreign portfolio investors (FPIs) sold equities worth $34 billion. The FPIs remained overall net buyers in the second half of 2022, but they have again turned net sellers in 2023. For instance, in the calendar year 2022, FPIs net sold $28 billion of equities in the first six months but then turned net buyers of equities to the tune of $12 billion in the second half of 2022. Overall, FPIs were net sellers of $16 billion in Indian equities in 2022. The second half of 2022 had given some hope of a revival in FPI inflows, but that has been largely negated in the first two months of 2023.
Year 2023: Heavy selling in equities, small buying in debt
The table below captures monthly FPI flow trends in equity and debt since for 2022 and 2023 till date on a monthly basis.
Calendar Month |
FPI Flows Secondary |
FPI Flows Primary |
FPI Flows Equity |
FPI Flows Debt/Hybrid |
Overall FPI Flows |
Calendar 2022 |
(146,048.38) |
24,608.94 |
(121,439.44) |
(11,375.78) |
(132,815.22) |
January 2023 |
(29,043.32) |
191.30 |
(28,852.02) |
2,308.27 |
(26,543.75) |
February 2023 |
(5,583.16) |
288.85 |
(5,294.31) |
1,155.19 |
(4,139.12) |
Total for 2023 |
(34,626.48) |
480.15 |
(34,146.33) |
3,463.46 |
(30,682.87) |
Data Source: NSDL (all figures are Rupees in crore). Negative figures in brackets
The only redeeming feature of February 2023 was that the selling was not as intense as January, but that does not really say much. FPIs continued to be net sellers on most of the days in February, just like in January 2023. The million dollar question really is; what has triggered this aggressive selling by FPIs in year 2022 so far?
The bottom line is that the promise of FPI flows reversing for the better, in the second half of 2022, has been largely belied. Year 2023 looks more like a return to reality. India has to face the dual demons of weakening fundamentals as well as a weaker rupee.
How FPI equity flows panned out in February 2023
The table below gives a granular picture of daily flows into Indian equities in the month of February 2023; both in rupee and in dollar terms.
Date | FPI Flow (Rs Crore) | Cumulative flows | FPI Flow($ billion) | Cumulative flow |
01-Feb-23 |
-4,657.87 |
-4,657.87 |
-569.85 |
-569.85 |
02-Feb-23 |
2,542.63 |
-2,115.24 |
310.64 |
-259.21 |
03-Feb-23 |
-3,637.69 |
-5,752.93 |
-443.87 |
-703.08 |
06-Feb-23 |
-249.91 |
-6,002.84 |
-30.39 |
-733.47 |
07-Feb-23 |
-1,038.49 |
-7,041.33 |
-125.95 |
-859.42 |
08-Feb-23 |
-2,206.82 |
-9,248.15 |
-266.86 |
-1,126.28 |
09-Feb-23 |
-456.38 |
-9,704.53 |
-55.20 |
-1,181.48 |
10-Feb-23 |
32.68 |
-9,671.85 |
3.95 |
-1,177.53 |
13-Feb-23 |
1,725.78 |
-7,946.07 |
208.98 |
-968.55 |
14-Feb-23 |
1,496.95 |
-6,449.12 |
181.00 |
-787.55 |
15-Feb-23 |
1,642.61 |
-4,806.51 |
198.58 |
-588.97 |
16-Feb-23 |
771.03 |
-4,035.48 |
93.04 |
-495.93 |
17-Feb-23 |
2,029.46 |
-2,006.02 |
245.58 |
-250.35 |
20-Feb-23 |
-744.54 |
-2,750.56 |
-89.91 |
-340.26 |
21-Feb-23 |
470.06 |
-2,280.50 |
56.85 |
-283.41 |
22-Feb-23 |
1,028.76 |
-1,251.74 |
124.32 |
-159.09 |
23-Feb-23 |
-61.88 |
-1,313.62 |
-7.47 |
-166.56 |
24-Feb-23 |
-999.12 |
-2,312.74 |
-120.72 |
-287.28 |
27-Feb-23 |
-1,353.06 |
-3,665.80 |
-163.52 |
-450.80 |
28-Feb-23 |
-1,628.51 |
-5,294.31 |
-196.41 |
-647.21 |
Data Source: NSDL
As is evident in the above table, despite the brief spell of buying by FPIs in Indian equities in the third week of February 2023, the flows could not really be sustained. In a sense, the turning point came on 22nd February, when the minutes of the Federal Open Markets Committee (FOMC) and the RBI Monetary Policy Committee (MPC) were published. The minutes of both the central banks clearly pointed to sustained hawkishness and also hinted that inflation was not going away in a hurry. This was underscored by the GDP data and the labour data from the US. The strong labour data has been almost preventing the transmission of higher rates into lower inflation. Fed is now preparing for a much longer fight against inflation, especially in its endeavour to bring it down to the 2% mark.
The big event to watch out for is the Fed meeting in March. Now, there are expectations that considering the sticky inflation, the Fed could look at a 50 bps rate hike instead of a 25 bps rate hike in March 2023. That is likely to impact FPI sentiments further in the Indian markets. The other big X-factor is how China recovery pans out, and that remains the big question mark, other than the future outlook of the Russia Ukraine war.
How do we see FPI sentiments evolving in March 2023?
At the very best, it is likely to remain cautious in the absence of any fresh triggers. There would be two triggers, and both would be in the realm of global macros.
March has generally been a neutral month for FPI flows, so we could see the real flow action in April after the March Fed meet. We need to keep our fingers crossed for now.
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