Weekly Musings – FPI flows for week ended December 06, 2024

9 Dec 2024 , 11:26 AM

FPI FLOWS ARE BACK WITH A BANG

For almost 7 weeks, the FPIs had been relentless sellers, since the start of October 2024. Things appear to have just about turned around. In the previous week to November 29, 2024, the FPIs were net buyers in Indian equities to the tune of Rs4,922 Crore or $587 Million. However, things changed sharply in the latest week to December 06, 2024 when FPIs turned net buyers in equities to the tune of Rs24,454 Crore or $2,886 Million. That is the kind of frenetic that has not been seen since September, although only time will tell if this is a shift in trend or just an aberration. What is rather paradoxical is that this surge in FPI inflows comes at a time when the Indian economy witnessed one of its slowest growth in recent quarters at just about 5.4% in Q2FY25. That is largely due to the GDP deflator.

On the global front, the situation continues to be fluid. The Fed has already cut rates by 75 bps, but the RBI has remained in the sidelines even in the December policy statement. However, the RBI policy did give a positive hint on liquidity by easing the CRR by 50 bps from 4.5% to 4.0%, effective from December. However, the global trade continues to be fluid and has now only worsened with the coup on Syria. However, markets are taking solace from the fact that the current demand / supply equations of crude oil are likely to keep Brent Crude at closer to $70/bbl. With the rupee already having weakened to ₹84.70/$, the FPIs found the overall markets fairly undervalued in dollar terms. That explains why the FPIs infused heavily into Indian equities in the first week of December 2024.

MACRO FPI FLOW PICTURE UP TO DECEMBER 06, 2024

The table captures monthly FPI flows into equity and debt for the last 3 calendar year viz., 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)	(23,331.04)	14,659.77	(8,671.27)	(7,588.75)	(16,260.02)
May-2024 (₹ Crore)	(30,613.87)	5,027.54	(25,586.33)	12,675.47	(12,910.86)
Jun-2024 (₹ Crore)	24,345.55	2,218.99	26,564.54	15,192.90	41,757.44
Jul-2024 (₹ Crore)	26,059.05	6,305.79	32,364.84	16,431.20	48,796.04
Aug-2024 (₹ Crore)	(5,552.01)	12,872.13	7,320.12	18,173.17	25,493.29
Sep-2024 (₹ Crore)	46,552.40	11,171.24	57,723.64	35,813.99	93,537.63
Oct-2024 (₹ Crore)	(1,13,858.81)	19,841.86	(94,016.95)	(2,340.68)	(96,357.63)
Nov-2024 (₹ Crore)	(39,315.78)	17,703.98	(21,611.80)	167.80	(21,444.00)
Dec-2024 (₹ Crore) #	17,921.66	6,531.97	24,453.63	10,318.41	34,772.04
Total for 2024 (₹ Crore)	(1,00,698.92)	1,10,132.99	9,434.07	1,65,169.55	1,74,603.62
For 2024 ($ Million)	(11,963.83)	13,145.40	1,181.57	19,791.80	20,973.37
# – Recent Data is up to December 06, 2024

Data Source: NSDL (Negative figures in brackets)

Unlike in the year 2022 and 2023, debt flows of FPIs dominated 2024. One only needs to look at the numbers. Out of the total net FPI flows of ₹1.75 Trillion in calendar 2024, FPI infusion in debt was ₹1.65 Trillion, while equities saw FPI inflows of just ₹0.10 Trillion. The net FPI inflow of $20.97 Billion in 2024 till date is comprised of FPI inflows into debt of $19.79 Billion and $1.18 Billion of net FPI inflows from equities. If you look at the break-up of this $1.18 Billion equity inflows in 2024, secondary market equities saw net selling of $(11.96) Billion, while the IPOs saw FPI infusion of $13.14 Billion in 2024, so far.

FPI SENTIMENTS – THE WEEK THAT WAS

For the latest week to December 06, 2024, FPIs turned net buyers in Indian equities to the tune of $2,886 Million. Monetary policy was the big trigger in the week.

• The monetary policy held the repo rates at 6.50%, thus holding the pegged SDF rate at 6.25% and the pegged MSF / Bank Rate at 6.75%. It was apparent even before the policy was announced that the RBI would not cut rates at a time when the inflation rate was at 6.21%. However, there is still the risk of monetary divergence since the Fed has already cut rates by a full 75 bps since September 2024.
• With a view to addressing the liquidity gaps in the system, the RBI cut the CRR by 50 bps from 4.5% to 4.0%. It will be done in two tranches in December. The cut in CRR is likely to release ₹1.17 Trillion of liquidity in the system. That would, however, still be insufficient since the liquidity short fall created by government payments moving to e-Kuber, is estimated at close to ₹3.75 Trillion. Hence another 100 bps cut is on the cards.
• In an interesting move, the RBI cut the growth estimates for the fiscal year FY25 and also raised the inflation estimates. On the inflation front, the FY25 full year estimate was raised by 30 bps from 4.5% to 4.8%. This is in the light of sharply higher inflation in the last two months, with October inflation touching 6.21%. In line with the weak Q2FY25 GDP growth data, the RBI has cut the GDP full year estimate by 60 bps from 7.2% to 6.6%. The indications were already there as post the October policy the RBI had internally pegged its estimate of GDP growth for FY25 at closer to 6.8%.
• US unemployment ratio has gone up marginally from 4.1% to 4.2% for the month of November. However, it is still lower than the peak level of 4.3%. The jobless claims also continued to rise. With the unemployment rate consistently at above 4%, the Fed may have reasons to implement another 25 bps of rate cut in its last meeting of the year on December 18, 2024. However, rate cuts in 2025 may be a lot more muted.
• The coming week promises to be a busy week for the IPOs. A total of 5 mainboard IPOs are expected to raise close to ₹18,000 crore between them. Most of these are also likely to attract aggressive FPI flows in the anchor portion and the QIB portion. The 5 mainboard IPOs include Vishal Mega Mart, Indian Gemmological Institute, Sai Life Care, Inventurus Knowledge Solutions, and MobiKwik. Four of these are above ₹2,500 crore.
• With the price of Brent crude at around $71/bbl, demand subdued and a supply glut, the rupee should get some respite this week. Add to that, the FPI flows have also been very robust in the previous week. Overall, the rupee should get some support. However, on a longer term basis, USDINR is pegged at 85/$ by early 2025 and 86/$ by end 2025.

The coming week has a number of key data points like IIP, India inflation and US inflation. However, the next big trigger to watch will be the Q2 current account deficit (CAD).

DAILY FPI EQUITY FLOWS FOR LAST 4 ROLLING WEEKS

Here is 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 flows
11-Nov-24	-3,553.45	-3,553.45	-421.15	-421.15
12-Nov-24	-364.35	-3,917.80	-43.17	-464.32
13-Nov-24	2,843.31	-1,074.49	336.88	-127.44
14-Nov-24	-1,352.13	-2,426.62	-160.20	-287.64
15-Nov-24	0.00	-2,426.62	0.00	-287.64
18-Nov-24	-1,493.00	-3,919.62	-176.89	-464.53
19-Nov-24	-2,028.21	-5,947.83	-240.34	-704.87
20-Nov-24	0.00	-5,947.83	0.00	-704.87
21-Nov-24	-1,917.71	-7,865.54	-227.21	-932.08
22-Nov-24	1,325.93	-6,539.61	256.99	-675.09
25-Nov-24	1,072.97	-5,466.64	126.98	-548.11
26-Nov-24	9,615.79	4,149.15	1,140.97	592.86
27-Nov-24	3,814.53	7,963.68	452.58	1,045.44
28-Nov-24	-1,048.89	6,914.79	-124.17	921.27
29-Nov-24	-8,532.90	-1,618.11	-1,009.91	-88.64
02-Dec-24	-990.32	-2,608.43	-117.21	-205.85
03-Dec-24	3,793.55	1,185.12	447.98	242.13
04-Dec-24	9,297.53	10,482.65	1,097.12	1,339.25
05-Dec-24	2,863.58	13,346.23	338.13	1,677.38
06-Dec-24	9,489.29	22,835.52	1,119.90	2,797.28

Data Source: NSDL

• In previous 7 rolling weeks, FPIs saw net inflows of $587 Million; net outflows of $(388) Million, $(288) Million, $(2,375) Million, $(979) Million, $(962) Million, and $(2,259) Million. In the latest week to December 06, 2024 net FPI equity inflows were to the tune of $2,886 Million; which is the second consecutive week of net buying by FPIs.
• If you look at the last 4 rolling weeks on a cumulative basis, total net FPI inflows into equities were to the tune ₹22,836 Crore or $2,797 Million; with the shift in trend clearly positive in the previous two weeks.

The focus now shifts to the specific announcements on data like the India CPI inflation, India IIP, US CPI inflation etc. However, the key focus would also be on the quarterly update on the current account deficit (CAD), which is expected to spike to 1.6% of GDP in Q2FY25.