FPIs dump record $11.2 Billion Indian equities in October

8 Nov 2024 , 01:17 PM

FPIS NET SELL $11.2 BILLION IN OCTOBER 2024

In the month of October 2024, previous FPI statistics appeared to be immaterial. In a show of record offloading, FPIs sold Indian equities worth $11.2 Bilion in the month of October. Actually, there was a small relief in the form of FPI inflows into IPOs at $2.3 Billion and if that is excluded then FPIs sold a massive $13.5 Billion in Indian equities in secondary markets. This is the highest FPI selling in equities in a single month; even higher than the selling seen at the peak of the global financial crisis of 2008 or the COVID pandemic of March 2020. What triggered this heavy FPI selling? There were several factors.

Firstly, there was the uncertainty around US elections and the November FOMC policy, with the RBI still not certain whether they should adopt a dovish policy or not. The weaker than expected Q2FY25 results only added credence to such fears. Secondly, the long on China and short on India trade continued during the month of October leading to a surge in FPI outflows from India. Thirdly, there were concerns that the worsening geopolitical situation in West Asia and the Middle East would eventually rub off on Indian economy in the form of higher imported inflation and lower growth. Lastly, there were concerns that valuations in India were too stretched, especially considering that the Buffett ratio had touched 141%, compared to a long period average of around 91%.

These concerns were evident in the FPIs selling Indian equities to the tune of $11.2 Billion in October. This more than offsets the $6.88 Billion of FPI inflows in September 2024. If you look at a longer perspective from the formation of the Modi 3.0 government in June, FPIs are still net buyers in India. However, it must be said that the short term sentiments of FPIs have been dented and it may take a real effort to get that momentum back. In the first half of October 2024, FPIs were net sellers to the tune of $7.9 Billion, while they net sold $3.3 Billion in equities in the second half of October; taking total selling to $11.2 Billion.

FPI AUC FALLS SHARPLY IN OCTOBER 2024

Assets under custody (AUC) is the closing market value of equities held by FPIs. It is a function of FPI flows as well as price accretion or depletion (as the case may be). Between September 2024 and October 2024, FPI AUC depleted from $930 Billion to $845 Billion. This was due to a combination of FPI outflows, combined with the value depletion amidst a sharp fall in the Nifty and the Sensex.

Industry Group	FPI AUC (Oct 2024) ($ Billion)	FPI AUC (Sep 2024) ($ Billion)
Financials (BFSI)	245.91	258.91
Information Technology (IT) Services	79.36	83.94
Automobiles and Auto Components	63.45	73.41
Healthcare and Pharmaceuticals	58.04	58.61
Fast Moving Consumer Goods (FMCG)	51.33	58.23
Oil & Gas	46.57	74.47
Capital Goods	45.76	49.31
Consumer Services	37.02	42.21
Power (generation and transmission)	36.29	40.43
Telecommunications	33.50	36.54
Consumer Durables	26.02	29.54
Metals and Mining	25.26	27.68
Realty	18.33	20.22
Services	17.41	19.37
Construction	16.19	17.33
Cement	14.51	15.84
Chemicals	14.10	14.98
Others	10.08	3.00
Top 18 Sectors	839.11	924.02
Other 6 sectors	6.22	6.45
Total FPI AUC	845.33	930.47

Data Source: NSDL

The table above captures the top 18 sectors where the FPI AUC is more than $10 Billion as of the close of October 2024. NSDL has pruned the list of sectors to 23. Out of these 23 sectors, the AUC of the top-18 sectors accounted for 99.26% of total FPI AUC of $845.33 Billion. In September 2024, overall FPI AUC (including equity, debt, and hybrids) had crossed the $1 Trillion mark for the first time ever. This month is well below that mark.

What about the components of AUC as of October 2024. At $245.91 Billion, BFSI continues to dominate the AUC stakes. The other key sectors by AUC were IT, automobiles, healthcare, FMCG, oil & gas, and capital goods. In terms of MOM change in AUC in October 2024, there was value depletion across the board with the sharpest fall in oil and gas sector, which fell in the AUC rankings from third rank to sixth rank. The Others category saw accretion in AUC, but that was more due to the FPI inflows into the Hyundai Motor India IPO this month.

FPI BUYING IN OCTOBER 2024 HELPED BY HYUNDAI MOTOR IPO

In October 2024, FPIs were net sellers of $11.2 Billion in Indian equities. It does not require a genius to figure out that the FPI buying sectors would be few and far between while FPI selling sectors would dominate. If you sum up the positive flow sectors, they added up to just $924 Million, while the negative flow sectors added up to $12.11 Billion. This point will be clear when we later move to the sell-off sectors, but first let us look at the handful of inflow sectors for FPIs.

FPI Net Buying in Sectors	H1-Oct-24 ($ Million)	H2-Oct-24 ($ Million)	Oct-24 ($ Million)
Others	508	292	800
Chemicals	66	4	70
Utilities	15	20	35

Data Source: NSDL

The “Others” category saw $800 Million of inflows and that is largely attributed to the massive FPI inflows into the Hyundai Motor India IPO. Other than that, chemicals and utilities saw net inflows from FPIs. Otherwise, it was a sea of red all through.

FIVE SECTORS SEE OVER $1 BILLION SELLING IN OCTOBER 2024

The title says it all. Here is a sectoral break-up of FPI net outflows from Indian equities in the month of October 2024.

FPI Net Selling in Sectors	H1-Oct-24 ($ Million)	H2-Oct-24 ($ Million)	Oct-24 ($ Million)
Financial Services (BFSI)	-2,768	-341	-3,109
Oil & Gas	-1,471	-1,079	-2,550
FMCG	-811	-567	-1,378
Automobiles	-967	-275	-1,242
Consumer Services	-551	-503	-1,054
Construction	-205	-348	-553
Cement	-170	-239	-409

Data Source: NSDL

Before we get into the sectors, some macro statistics should help. In October 2024, 5 sectors saw FPI net selling of over $1 Billion. In fact, 11 sectors overall saw FPI selling of over $300 Million in October 2024. The worst hit sectors were BFSI, oil & gas, FMCG, Automobiles and consumer services. Heavyweights have taken it on the chin and it looks like a clear case of macro basket selling in Indian equities by FPIs in October 2024. With gross FPI selling of $12.11 Billion and net selling of $11.2 Billion, the only narrative in October was FPI selling in equities. Ironically, FPIs were sellers in October 2024 in debt markets too.

OUTLOOK FOR FPI FLOWS IN COMING MONTHS

FPIs have been ambivalent about Indian markets in the second half of 2024 which is not surprising. The year 2024 had started with a lot of promise with equity and debt flows very robust. However, things appeared to have changed in the second half of the year. It has been a combination of the US election uncertainty and the Fed policy ambiguity that has kept the FPIs guessing. The recent macro data flows on US unemployment, PCE inflation and GDP growth indicate that the rate cuts would continue, albeit in a more calibrated manner.

It will not be as aggressive as the CME Fedwatch had originally painted out. But, the bigger concern on FPI flows is what is happening on the domestic front. India saw two instances of core sector contraction and IIP contraction in the previous month. It is not clear if that was a flash in the pan or an outcome of slowing capex. The latter is not a good situation to have. FPI flows will largely depend on how quickly the RBI acts to cut rates and reduce the cost of funds for Indian corporates. For now, we have to wait till December for RBI signals!