Weekly Musings – FPI flows for week ended December 13, 2024

16 Dec 2024 , 10:04 AM

FPI FLOWS TURN CAUTIOUS IN THE WEEK

After 2 weeks of net buying, the FPIs turned net sellers in the week to December 13, 2024. However, at $(199) Million, the welling was really nothing much to worry about. In the previous two weeks, the FPIs had infused $587 Million and $2,886 Million respectively. The FPI selling in this week was largely driven by a single day selling on the last day of the week. There was a sense of caution ahead of key data points expected next week. However, one strong reason for the FPIs to go slow on inflows is the slightly shaky position of the rupee. With China pre-emptively weakening the Yuan to stay competitive in the post-tariff Trump-world; most Asian currencies came under pressure and Indian rupee was no exception. Also, the Q3 results will start from the second week of January and markets are wary that this could be one more quarter of indifferent corporate sales and profit data.

During the week, the USDINR got closer to ₹84.80/$ and now it looks like the indicative futures prices of ₹85/$ by early 2025 and ₹86/$ by end of 2025 may become a reality. The pressure on the rupee is likely to keep FPI cautious. But, there are key data points also coming up. The RBI MPC announces its minutes in the coming week, wherein the logic of the 4:2 rate cut vote would be clearer. Also, the Fed announces its last policy of the year on December 18, 2024; along with the quarterly projections of long term data. Due to the Christmas holidays, the US data on Q3 GDP and November PCE inflation will also be announce in the coming week itself. Also, there is the upcoming India trade deficit data as well as the upcoming current account deficit (CAD) for Q2FY25. Truly, a data heavy week is keeping most of the FPIs on tenterhooks.

MACRO FPI FLOW PICTURE UP TO DECEMBER 13, 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) #	14,435.71	8,329.91	22,765.62	11,552.37	34,317.99
Total for 2024 (₹ Crore)	(1,04,184.67)	1,11,930.93	7,746.06	1,66,403.51	1,74,149.57
For 2024 ($ Million)	(12,374.88)	13,357.51	982.63	19,938.69	20,921.32
# – Recent Data is up to December 13, 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 ₹1.74 Trillion in calendar 2024, FPI infusion in debt was ₹1.66 Trillion, while equities saw FPI inflows of just ₹0.08 Trillion. The net FPI inflow of $20.92 Billion in 2024 till date is comprised of FPI inflows into debt of $19.94 Billion and $0.98 Billion of net FPI inflows into equities. If you look at the break-up of this $0.98 Billion equity inflows in 2024, secondary market equities saw net selling of $(12.38) Billion, while the IPOs saw FPI infusion of $13.36 Billion in 2024, till date.

FPI SENTIMENTS – THE WEEK THAT WAS

For the latest week to December 13, 2024, FPIs turned net sellers in Indian equities to the tune of $(199) Million. Here are some of the events that defined FPI flows in the week.

• The India inflation data was slightly sober at 5.48% for November, compared to 6.21% in October. The gains came largely from a fall in food inflation, while core inflation remained static at 3.7%. However, the FPIs were not enthused considering that most of the fall in the inflation can be explained by the base effect and it remains to be seen how the inflation looks like, shorn of the base effect. Also, concerns over the situation in West Asia and the stickiness of core inflation remain.
• The index of industrial production (IIP) for the month of October 2024 improved from 3.09% to 3.45%. After contracting briefly in August 2024, the IIP has surely picked up momentum in the last two months. The good news is that, in the last two months, the entire positive traction has come from manufacturing; even as mining and electricity have managed to offer support. For October 2024, the IIP growth was not only positive on a yoy basis, but also on a high frequency MOM basis.
• The US Bureau of Labor Statistics also announced the consumer inflation data for the month of November. The inflation inched up by 10 bps to 2.7% on a yoy basis. The high frequency MOM inflation also spiked to 0.3%, the highest level in 6 months. Even in the US, the pressure is coming from core inflation as the gains of the post COVID supply chain normalization are gradually waning. Food prices have also been under pressure and the steady oil price have taken the US inflation farther from its avowed target of 2%. This month, the time gap between CPI inflation and PCE inflation will be very short.
• CII urges the government to go slow on fiscal deficit control. The government has a target of 4.8% fiscal deficit as a percentage of GDP for FY25 and under 4.5% for FY26. The CII has been making a case for the government to go slow on controlling fiscal deficit and instead focus on raising the level of borrowings to boost capex spending and growth. However, the government has made it clear that it needs private sector participation in capex and may not relent on fiscal prudence.
• The price of Brent Crude prices hardened by over 5% to $74.50/bbl after news emerged that the EU may tighten its sanctions on Russia and Iran. The markets also believed that the Fed may cut rates by another 25 bps in December policy and that could give a boost to consumer spending on fuel. Meanwhile, the situation in Syria is not getting any better and that is keeping oil in a state of flux.
• The USDINR weakened further to the ₹84.78/$ levels during the week. The pressure came from indications that China may allow the Yuan to weaken in order to offset the impact of tariffs that Trump planned to impose on China. This lead to most EM currencies, including the Indian rupee weakening. The RBI continued to be active in defending the rupee and that is evident from the persistent fall in dollar reserves.

The coming week has a number of key data points like the MPC minutes, Fed policy statement, WPI inflation, trade data, US GDP, PCE inflation etc. But the big data point this month will be Q2FY25 current account deficit, which is expected to spike to 1.6%  of GDP.

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
18-Nov-24	-1,493.00	-1,493.00	-176.89	-176.89
19-Nov-24	-2,028.21	-3,521.21	-240.34	-417.23
20-Nov-24	0.00	-3,521.21	0.00	-417.23
21-Nov-24	-1,917.71	-5,438.92	-227.21	-644.44
22-Nov-24	1,325.93	-4,112.99	256.99	-387.45
25-Nov-24	1,072.97	-3,040.02	126.98	-260.47
26-Nov-24	9,615.79	6,575.77	1,140.97	880.50
27-Nov-24	3,814.53	10,390.30	452.58	1,333.08
28-Nov-24	-1,048.89	9,341.41	-124.17	1,208.91
29-Nov-24	-8,532.90	808.51	-1,009.91	199.00
02-Dec-24	-990.32	-181.81	-117.21	81.79
03-Dec-24	3,793.55	3,611.74	447.98	529.77
04-Dec-24	9,297.53	12,909.27	1,097.12	1,626.89
05-Dec-24	2,863.58	15,772.85	338.13	1,965.02
06-Dec-24	9,489.29	25,262.14	1,119.90	3,084.92
09-Dec-24	-786.13	24,476.01	-92.86	2,992.06
10-Dec-24	599.78	25,075.79	70.79	3,062.85
11-Dec-24	1,867.12	26,942.91	220.04	3,282.89
12-Dec-24	194.75	27,137.66	22.96	3,305.85
13-Dec-24	-3,563.53	23,574.13	-419.87	2,885.98

Data Source: NSDL

• In previous 7 rolling weeks, FPIs saw net inflows of $2,86 Million, $587 Million; net outflows of $(388) Million, $(288) Million, $(2,375) Million, $(979) Million, and $(962) Million. In the latest week to December 13, 2024 net FPI equity outflows were to the tune of $(199) Million; which is more a sign of caution than a sign of sell-off.
• If you look at the last 4 rolling weeks on a cumulative basis, total net FPI inflows into equities were to the tune ₹23,574 Crore or $2,886 Million; with the broad trend looking positive for now.

The focus shifts to the outcome of the RBI MPC minutes and the Fed policy statement during the coming week.