FED GOVERNORS SEND MIXED SIGNALS
In the latest week to April 05, 2024, there were not too many global data points or even domestic data points to impact the FPI flows. However, FPI flows were still neutral after the fiscal year end and many are still evaluating the allocations ahead of the general elections. For now, election outcome appears to hint towards a stable formation, but in the realm of fickle public opinion, it is best not to overestimate your predictive skills. The Fed speeches continue to give mixed signals as the hints are clearly getting more ambivalent. Powell had assured of 3 rate cuts or at the worst case, 2 rate cuts in 2024. However, there are others like Chris Waller and Michelle Bowman who incline towards not giving any guidance on rate cuts. They want the entire activity to be purely data driven. That confusion was reflected in the FPI flows in the week, which stayed neutral with negative bias at $(39) Million.
To an extent, this week saw the market impact of the positive data flows of the last week of March. Most of the key announcements in the previous week had come after the Indian markets had closed. That included data points like the US GDP growth estimate for the third quarter, the US PCE inflation and even the monthly update on the core sector and the fiscal deficit. All these reactions were only visible in the current week. The latest week to April 05, 2024 saw FPIs as net sellers to the tune of $39 Million. In the last 4 weeks, FPIs were net sellers of $360 Million, net sellers of $314 Million, net buyers of $3,488 Million, and net buyers of $919 Million. However, the combined selling of $713 Million in the last 3 weeks can be attributed to more of year-end adjustments and are actually quite paltry if you compare with the $5.56 Billion infusion by FPIs in the 4 weeks prior to that. Perhaps, the FPIs may prefer to commit funds, once there is clarity on the political front.
OIL PRICES REMAINED THE CONCERN FOR FPI FLOWS IN THE WEEK
During the week, an important data point was the crude oil prices. The Brent Crude closed the week above $91/bbl, which is a fairly intimidating level. Normally, any level above $80/bbl tends to show pressure on Indian balance of payments. This is the election phase when the government cannot really afford to hike petrol and diesel prices, even if the price of crude goes up. The week saw Brent crude spike to above $91/bbl. While it is true that the global oil market is likely to stay undersupplied, the current concerns pertain to the worsening geopolitical situation in the Middle East. After Israel allegedly attacked some of the Iranian assets in Syria, Iran has threatened full-fledged retaliation. If Iran is pulled into this war, it not only broadens the conflict, but also has its impact on the Arab Peninsula and the Straits of Hormuz, which transport bulk of the oil in Asia. That was the reason oil prices spiked sharply. Of course, the US continues to churn out oil at record levels, but the geopolitical risk in and around the Red Sea is getting hard to handle.
MACRO FPI FLOW PICTURE UP TO APRIL 05, 2024
The table captures monthly FPI flows into equity and debt for 2022, 2023, and 2024.
Calendar
Month |
FPI Flows Secondary | FPI Flows Primary | FPI Flows Equity | FPI Flows Debt/Hybrid | Overall FPI Flows |
Calendar 2022 (₹ Crore) | (146,048.38) | 24,608.94 | (121,439.44) | (11,375.78) | (132,815.22) |
Calendar 2023 (₹ Crore) | 1,27,759.75 | 43,347.14 | 1,71,106.89 | 65,954.38 | 2,37,061.27 |
Jan-2024 (₹ Crore) | (28,863.89) | 3,120.34 | (25,743.55) | 19,150.21 | (6,593.34) |
Feb-2024 (₹ Crore) | (3,194.72) | 4,733.60 | 1,538.88 | 30,277.95 | 31,816.83 |
Mar-2024 (₹ Crore) | 29,152.54 | 5,945.78 | 35,098.32 | 16,987.88 | 51,996.20 |
Apr-2024 (₹ Crore) # | (1,821.67) | 1,497.03 | (324.64) | 1,768.24 | 1,443.60 |
Total for 2024 (₹ Crore) | (4,727.74) | 15,296.75 | 10,569.01 | 68,094.28 | 78,663.29 |
For 2024 ($ Million) | (552.86) | 1,843.52 | 1,290.66 | 8,202.30 | 9,492.96 |
# – Recent Data is up to April 05, 2024 |
Data Source: NSDL (Negative figures in brackets)
As of April 05, 2024, the FPIs consolidated their position as net buyers in the year 2024 across equity and debt combined. However, they remained net sellers in the first quarter of 2024 in secondary market equities. For calendar 2024 overall, the FPIs were net buyers to the tune of $9,492.96 Million. However, the equity flows continue to be tepid and most of the traction is coming from the debt side. For 2024 till date, FPIs net bought equities worth $1,290.66 Million and were net buyers in debt to the tune of $8,202.30 Million. As of the close of the first week of April2 2024, the FPIs were still net sellers in secondary market equities, while the buying in primary market IPOs compensated for that. On the secondary markets front, despite the aggressive buying in March, the overall flows are still negative.
There are 2 things we can infer from the data. Even as FPI equity flows stayed tepid during this week amidst the start of the new fiscal year, most of the macros are robust. It was just about the annual adjustment bets that brought down the flows. FPIs net sold $713 Million in equities in the last 3 weeks, and that is not too much when compared to the fact that FPIs were net buyers to the tune of $5.56 Billion in the 4 weeks prior to that. This week may not be representative due to being the first week of the new fiscal. However, one paradoxical data is that the VIX continues to be subdued in the 11-12 range, despite upcoming elections.
FPI SENTIMENTS – THE WEEK THAT WAS
For the latest week to April 05, 2024, FPIs were net sellers to the tune of $39 Million; while selling $713 Million in the last 2 weeks. This is fairly small compared to the size of inflows in the weeks prior to that. Here are 5 key data points that influenced FPI flows this week.
The big question still remains on when would the Fed start cutting rates. As the weeks go by, the situation only looks more ambivalent and FPIs were have to perhaps have to reconcile themselves to living with an ambivalent Federal Reserve.
DAILY FPI EQUITY FLOWS FOR LAST 4 ROLLING WEEKS
Here we look at the last 4 rolling weeks data on FPI flows as it shows us a time series moving average of FPI flows.
Date | FPI Flow (₹ Crore) | Cumulative flows | FPI Flow($ Million) | Cumulative flow |
11-Mar-24 | 10,588.61 | 10,588.61 | 1,279.15 | 1,279.15 |
12-Mar-24 | 3,945.51 | 14,534.12 | 477.22 | 1,756.37 |
13-Mar-24 | -115.60 | 14,418.52 | -13.97 | 1,742.40 |
14-Mar-24 | 14,582.35 | 29,000.87 | 1,758.97 | 3,501.37 |
15-Mar-24 | -114.24 | 28,886.63 | -13.79 | 3,487.58 |
18-Mar-24 | 773.09 | 29,659.72 | 93.26 | 3,580.84 |
19-Mar-24 | -1,166.67 | 28,493.05 | -140.71 | 3,440.13 |
20-Mar-24 | 1,351.07 | 29,844.12 | 162.90 | 3,603.03 |
21-Mar-24 | -2,242.76 | 27,601.36 | -269.88 | 3,333.15 |
22-Mar-24 | -1,326.96 | 26,274.40 | -159.62 | 3,173.53 |
25-Mar-24 | 0.00 | 26,274.40 | 0.00 | 3,173.53 |
26-Mar-24 | -3,871.43 | 22,402.97 | -464.45 | 2,709.08 |
27-Mar-24 | -3,170.59 | 19,232.38 | -380.37 | 2,328.71 |
28-Mar-24 | 4,042.50 | 23,274.88 | 485.14 | 2,813.85 |
29-Mar-24 | 0.00 | 23,274.88 | 0.00 | 2,813.85 |
01-Apr-24 | 0.00 | 23,274.88 | 0.00 | 2,813.85 |
02-Apr-24 | 2,355.23 | 25,630.11 | 282.49 | 3,096.34 |
03-Apr-24 | -447.29 | 25,182.82 | -53.66 | 3,042.68 |
04-Apr-24 | -1,254.92 | 23,927.90 | -150.43 | 2,892.25 |
05-Apr-24 | -977.66 | 22,950.24 | -117.16 | 2,775.09 |
Data Source: NSDL
The last 3 weeks saw FPI outflows of $39 Million, $360 Million, and $314 Million, after four successive weeks of meaningful positive flows into Indian equities. Here is a quick run-down.
TRIGGERS FOR FPI FLOWS IN COMING WEEKS?
There will be 3 key triggers for FPI flows in the coming weeks.
FPI flows in the coming weeks will determine the confidence that the FPIs are willing to repose on India amidst the global geopolitical headwinds, the political uncertainty in India and the relatively rich valuations that India is enjoying. It is going to be a tough ask.
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