iifl-logo

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

sidebar image

Weekly Musings – FPI flows for week ended April 05, 2024

8 Apr 2024 , 06:35 AM

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.

  • While the week may not have been too heavy or intense on data, most of the data flows of the last week of March 2024. While the current account deficit data did come in earlier, other data points like the US GDP Q4 estimates, the PCE inflation in the US, India core sector update, India fiscal deficit update; they all were only announced after the Indian markets had closed for trading. The impact was carried forward to this week.
  • Oil prices continue to be elevated during the week and crossed the psychological $90/bbl mark. It closed the week at above $91/bbl. The record US output was having little impact on sobering prices as oil was reacting largely to the worsening tensions between Iran and Israel. Any conflict between Iran and Israel, not only widens the conflict zone, but also puts the Arab Peninsula and the Straits of Hormuz under risk.
  • Gold prices continued to rally during the week. Normally, the FPI consider gold prices as a barometer of the risks in the equity markets. Gold prices shot up to a life time high of $2,329/oz during the week, indicating that amidst all the equity frenzy, there appears to be a rush for safety. To add to the hints from rising gold prices, there is also the strength in the dollar index (DXY), which has kept the Indian rupee under pressure.
  • Year FY24 was a year of bumper gains on the Nifty and smaller generic indices. The Nifty closed the fiscal year with gains of 30%, while the mid-cap index closed with gains of 62% and the small cap index with gains of 72% respectively. That was a stellar performance all-round, but that has made FPIs slightly sceptical about valuations. That could be one of the key reasons impacting FPI flows in the short run.
  • Finaly, let us turn to the big triggers on the growth front. The indications in the week were that the commitments to India still continue; from global investors and from domestic companies. For instance, Ultratech has laid out a multi-Billion dollar investment outlay in the coming years to expand its capacity and widen its gap with Adani Cements. On the other hand, Blackstone group is planning to invest around $2 Billion each year into India. They want to repeat their realty magic in equities too. The investment climate still remains very robust at this point.

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.

  • In previous 5 rolling weeks, FPIs had seen net outflows of $360 Million, $314 Million, net inflows of $3,488 Million, net inflows of $919 Million, and net inflows of $743 Million. The latest week to April 05, 2024 saw net FPI outflows from equities to the tune of a marginal $39 Million. The combined outflow of $713 Million in last 3 weeks is marginal, compared to FPI infusion of $5.56 Billion in 4 weeks prior to that.
  • If you look at the last 4 rolling weeks on a cumulative basis, total net FPI inflows into equities have been decisively positive at ₹22,950 Crore or $2,775 Million; although the momentum is waning. The rolling 4-week flows had turned into positive territory about 5 weeks back, after being in the negative for more than 9 weeks in a row. In the current week, FPI equity outflows were more than offset by debt market inflows from FPIs.

 

TRIGGERS FOR FPI FLOWS IN COMING WEEKS?

There will be 3 key triggers for FPI flows in the coming weeks.

  • The coming week will see the FPI flows reacting to the US consumer inflation number. US inflation has been under pressure for some time now and this will determine if the Fed is going to get news of inflation sobering. With the global crude prices shooting up and core inflation substantially down, further traction on inflation looks difficult.
  • Oil will continue to be a big issue in the coming week. The conflict between Israel and Iran is only worsening by the day and there is not much that can be done. Global leaders are only trying to defuse the situation and work out a ceasefire between Israel and Hamas. However, there is not much progress and that is likely to oil prices elevated.
  • Of course, the big factor that will drive the FPI flows next week will be how they are willing to take fresh new year bets ahead of the general elections. FPIs are already making their calculations on how to craft their strategy under different scenarios, but the broad bet would still be that the reforms process continues unabated, irrespective of how the political equation changes. However, that is easier said, than done.

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.

Related Tags

  • Foreign Investors
  • FPIs
  • nifty
  • PortfolioFlows
  • RBIPolicy
  • sensex
  • StockMarkets
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More

Invest Right News

BSE: Firing on all cylinders
9 Apr 2024|10:33 AM
Read More
Knowledge Center
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Capital Services Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Loading...

Follow us on

facebooktwitterrssyoutubeinstagramlinkedintelegram

2025, IIFL Capital Services Ltd. All Rights Reserved

ATTENTION INVESTORS

RISK DISCLOSURE ON DERIVATIVES

Copyright © IIFL Capital Services Limited (Formerly known as IIFL Securities Ltd). All rights Reserved.

IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)

ISO certification icon
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.