Weekly Musings – FPI flows for week ended November 01, 2024

4 Nov 2024 , 02:38 PM

OCTOBER 2024 FPI NUMBER MUGGED BY REALITY

After the euphoria of the previous 3 months, October 2024 saw equity FPI selling to the tune of $11.2 Billion. Actually, the secondary market selling in equities was to the tune of $13.5 Billion, but was toned down by $2.3 Billion of inflows into IPOs. The net FPI equity selling of $11.2 Billion is the worst bout of selling by FPIs in a month. The intensity of the selling is evident from the fact that the FPIs were net sellers on all days in October, except one. The India story may still be intact from a long term perspective, but in tumultuous times, that may not be sufficient to please the investors.

For now, FPIs investing in India are being spooked by 3 factors. Firstly, the weak Q2FY25 results and the Buffett Ratio at 1.41X have raised concerns over valuations. Secondly, there are concerns that the geopolitical risks in West Asia could lead to a genuine spike in imported inflation for India. Thirdly, FPIs are heavily betting on a short India / long China trade. It is hard to say if it will work, but the fact is that the FPIs see China gaining from low valuations and a large fiscal stimulus package by the Chinese government.

MACRO FPI FLOW PICTURE UP TO NOVEMBER 01, 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) #	0.00	0.00	0.00	0.00	0.00
Total for 2024 (₹ Crore)	(79,304.80)	85,897.04	6,592.24	1,54,683.34	1,61,275.58
For 2024 ($ Million)	(9,416.65)	10,275.52	858.87	18,550.62	19,409.49
# – Recent Data is up to November 01, 2024

Data Source: NSDL (Negative figures in brackets)

Compared to calendar 2023, the IPO inflows have doubled in calendar 2024 till date while the debt inflows have more than doubled. The real problem was in the secondary market equities where FPIs have been heavy net sellers in 2024. In 2023, the net inflows from FPIs into debt was to the tune of ₹0.66 Trillion, while debt inflows have already touched ₹1.55 Trillion in year 2024 till date. In short if net equity flows were 72.2% of total FPI flows in the year 2023, the ratio falls to just 4.09% in the year 2024. The combination of index inclusion and FAR bonds have given a boost to FPI debt flows; pegged at 95.81% of total net FPI inflows in 2024. The net FPI inflow of $19.41 Billion in 2024 till date is comprised of FPI inflows into debt of $18.55 Billion and just $0.86 Billion into equities. Even the $0.86 Billion into equity comprised of; FPI inflows into IPOs of $10.28 Billion, and FPI secondary market FPI outflows of $(9.42) Billion.

FPI SENTIMENTS – THE WEEK THAT WAS

For the latest week to November 01, 2024, FPIs were net sellers for the fifth week in a row at $(979) Million. Here is what drove FPI sentiments in the week.

• The core sector growth in India for September 2024 turned around to 2.04%, after contracting -1.58% (revised from -1.77%) for August 2024. While the base effect had played a big role in August contraction, there were also concerns that it could be an outcome of the weak capex growth at just 11.1% in FY25. However, with the core sector bouncing back into positive, that looks more like a flash in the pan. Five out of the eight core sectors saw expansion of output in September 2024
• In a surprising testament on limited investment opportunities globally, Berkshire Hathaway is currently sitting on cash balances of $325 billion, the highest cash ever held by the fund. Much of the cash accretion has come from Berkshire selling substantial shares in Apple and Bank of America. Warren Buffett has been underlining for last few quarters that he finds US treasuries the most attractive investment.
• The Indian economy saw fiscal deficit touch 29.4% of the total full year target as of the close of first half of FY25. Revenue flows have been strong and the government has been going slow on revenue and capex spending this year. This gives hope that the final fiscal deficit figure may be contained under 4.9% of full year GDP.
• US GDP growth for the third quarter ended September 2024 came in at 2.8%, compared to 3.0% in Q2. However, this is only the first advance estimates and there are two more estimates slated to come out. The street expectation is that actual growth for Q3 may also end up closer to 3.0%, largely dispelling the fears of a hard landing.
• PCE inflation in the US for September 2024 came in 20 bps lower at 2.1%. It is now just 10 bps away from its long term target of 2% inflation. However, the fall in the PCE inflation in the last few months has been largely on account of lower fuel prices. Core inflation remains sticky and food inflation is also showing signs of bouncing back.

The big data flow next week will be the US monetary policy announcement and the US presidential elections.

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
07-Oct-24	-9,645.10	-9,645.10	-1,148.69	-1,148.69
08-Oct-24	-8,126.70	-17,771.80	-967.79	-2,116.48
09-Oct-24	-5,380.70	-23,152.50	-641.02	-2,757.50
10-Oct-24	-3,679.26	-26,831.76	-438.21	-3,195.71
11-Oct-24	-4,736.97	-31,568.73	-564.14	-3,759.85
14-Oct-24	-4,031.40	-35,600.13	-479.60	-4,239.45
15-Oct-24	-3,558.36	-39,158.49	-423.25	-4,662.70
16-Oct-24	-1,533.83	-40,692.32	-182.44	-4,845.14
17-Oct-24	-2,563.80	-43,256.12	-304.97	-5,150.11
18-Oct-24	-7,302.99	-50,559.11	-869.09	-6,019.20
21-Oct-24	-5,143.98	-55,703.09	-611.86	-6,631.06
22-Oct-24	10,709.59	-44,993.50	1,273.82	-5,357.24
23-Oct-24	-3,827.33	-48,820.83	-455.25	-5,812.49
24-Oct-24	-4,990.74	-53,811.57	-593.60	-6,406.09
25-Oct-24	-4,836.55	-58,648.12	-575.27	-6,981.36
28-Oct-24	-3,027.21	-61,675.33	-360.05	-7,341.41
29-Oct-24	-2,109.20	-63,784.53	-250.87	-7,592.28
30-Oct-24	-892.63	-64,677.16	-106.17	-7,698.45
31-Oct-24	-2,197.62	-66,874.78	-261.36	-7,959.81
01-Nov-24	0.00	-66,874.78	0.00	-7,959.81

Data Source: NSDL

• In previous 7 rolling weeks, FPIs saw net outflows of $(962) Million, $(2,259) Million, $(3,760) Million, $(3,124) Million; and net inflows of $2,832 Million, $696 Million, and $2,010 Million. In the latest week to November 01, 2024 net FPI equity outflows were to the tune of $(979) Million; which is 5 consecutive weeks of sharp selling in equities.
• If you look at the last 4 rolling weeks on a cumulative basis, total net FPI outflows from equities were to the tune ₹(66,875) Crore or $(7,960) Million; largely spoilt by the sell-off in last 4 weeks.

The concerns, now, are on global geopolitics and on internals like Q2 results and inflation.

BIG TRIGGER NEXT WEEK – FED MONETARY POLICY

The big data trigger for FPIs in the coming week will be the Fed monetary policy, which will be announced two days after the presidential elections. The elections are likely to have limited impact on the Fed policy decision, but the street expectation is that the Fed may cut rates by another 25 bps in November. A more calibrated approach to rate cuts would assure the markets that the Fed has managed to control inflation without triggering the risk of hard landing. That should be positive for FPI flows into EMs, including India.