Weekly Musings – FPI flows for week ended November 08, 2024

11 Nov 2024 , 11:11 AM

FPI SELLING SAGA CONTINUES IN NOVEMBER 2024 TOO

The month of October 2024 had seen FPI selling in equities to the tune of $11.2 Billion. Actually, the secondary market equity selling by FPIs in October 2024 was to the tune of $13.5 Billion; partially mitigated by FPI IPO inflows of $2.3 Billion. If October was a month of heavy FPI selling, November 2024 has not been too encouraging either. The first week of November 2024 saw FPI net selling in equities to the tune of $2.37 Billion. The intensity of the selling is evident from the fact that the FPIs were net sellers on all days of the week. In October, FPIs were net sellers of over $1 Billion in 5 sectors and BFSI again appears to be bearing the brunt of the FPI selling in November also.

For now, FPIs investing in India are being influenced by 3 factors. Firstly, a Trump victory means that the world must be prepared for a more inward-looking America. That is not great news for EMs like India. Secondly, China stimulus package of $1.4 Trillion is likely to accentuate the long-China / Short India trade for FPIs. Thirdly, there are growing concerns about whether the valuations in India have been stretched for too long. Clearly, Buffett ratio of 141% amidst elevated interest rates and falling profitability is not the best situation to be in. That is something the FPIs are starting to acknowledge.

MACRO FPI FLOW PICTURE UP TO NOVEMBER 08, 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) #	(21,961.46)	1,967.77	(19,993.69)	3,517.08	(16,476.61)
Total for 2024 (₹ Crore)	(1,01,266.26)	87,864.81	(13,401.45)	1,58,200.42	1,44,798.97
For 2024 ($ Million)	(12,025.19)	10,509.48	(1,515.71)	18,969.66	17,453.95
# – Recent Data is up to November 08, 2024

Data Source: NSDL (Negative figures in brackets)

Unlike in the year 2022 and 2023, it is debt flows of FPIs that fully dominated 2024. Just look at the numbers. Out of the total net FPI flows of ₹1.45 Trillion, FPI infusion in debt was ₹1.58 Trillion, while equities saw net FPI outflows despite the robust response from FPIs in the IPO market. The net FPI inflow of $17.45 Billion in 2024 till date is comprised of FPI inflows into debt of $18.97 Billion and $(1.52) Billion of net FPI outflows from equities. If you look at the break-up of this $(1.52) Billion equity outflow in 2024, secondary market equities saw net selling of $(12.03) Billion, as IPOs saw FPI infusion of $10.51 Billion in 2024, so far.

FPI SENTIMENTS – THE WEEK THAT WAS
For the latest week to November 08, 2024, FPIs were net sellers for the sixth week in a row at $(2.37) Billion. Here is what drove FPI sentiments in the week.

1. The US election outcome was a rather surprising, although the markets are not complaining. The best of poll pundits had predicted a close election outcome, but in the end Donald Trump had an easy victory over Kamala Harris. Clearly, the US voters preferred a more aggressive and jingoistic Trump who managed to make the right noises. It remains to be seen how he goes about his economic policy, but considering the mandate, his sanctions on China and tariffs on other countries are likely to be on the radar. However, equity markets have been scaling new highs in the US.
2. The Fed November policy continued its dovish stance and cut rates by another 25 bps, taking the total rate cut since September 18, 2024 to 75 basis points. There have been concerns over the likely conflict between Trump and Jerome Powell, something which had been there even in Trump’s previous term. However, Powell’s term ends in 2026 and that is likely to remain unaffected. For now, the CME Fedwatch is expecting overall rate cuts by end of 2025 to be between 150 bps and 175 bps.
3. The Indian rupee plummeted to ₹84.39/$ by the close of the week, after touching an all-time low of ₹84.44/$ during the week. The persistent strength in the dollar index and the possibility of a less dovish stance by the Fed has hardened the dollar. The RBI has been intervening by selling dollar as is evident in the falling forex reserves, but that has not had much impact in defending the rupee. In fact, the rupee weakness and the FPI selling normally tend to feed into each other.
4. China finally announced a massive $1.4 Trillion fiscal stimulus package that will be implemented over the next five years. In the last few weeks, there has been a long-China / Short India trade going on among FPIs on this stimulus anticipation. The actual package announced by China is much larger than originally indicated. That means; the flows away from India could only accelerate in the coming weeks.
5. In one of the most significant corrections in the market, the stock of Reliance Industries has fallen more than 22% in over a month, losing nearly $50 billion in market cap. While there have been concerns about the Q2FY25 results and the pressures in the O2C business, there have also been valuation concerns as incremental growth in retail and digital has not been to the extent expected. That has dampened FPI sentiments in the Indian markets overall.

The big data flow next week will be the India and US inflation numbers as well as the India IIP data, which will be released at 4.00 pm for the first time.

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
14-Oct-24	-4,031.40	-4,031.40	-479.60	-479.60
15-Oct-24	-3,558.36	-7,589.76	-423.25	-902.85
16-Oct-24	-1,533.83	-9,123.59	-182.44	-1,085.29
17-Oct-24	-2,563.80	-11,687.39	-304.97	-1,390.26
18-Oct-24	-7,302.99	-18,990.38	-869.09	-2,259.35
21-Oct-24	-5,143.98	-24,134.36	-611.86	-2,871.21
22-Oct-24	10,709.59	-13,424.77	1,273.82	-1,597.39
23-Oct-24	-3,827.33	-17,252.10	-455.25	-2,052.64
24-Oct-24	-4,990.74	-22,242.84	-593.60	-2,646.24
25-Oct-24	-4,836.55	-27,079.39	-575.27	-3,221.51
28-Oct-24	-3,027.21	-30,106.60	-360.05	-3,581.56
29-Oct-24	-2,109.20	-32,215.80	-250.87	-3,832.43
30-Oct-24	-892.63	-33,108.43	-106.17	-3,938.60
31-Oct-24	-2,197.62	-35,306.05	-261.36	-4,199.96
01-Nov-24	0.00	-35,306.05	0.00	-4,199.96
04-Nov-24	-4,343.53	-39,649.58	-516.54	-4,716.50
05-Nov-24	-4,561.75	-44,211.33	-542.38	-5,258.88
06-Nov-24	-1,739.29	-45,950.62	-206.75	-5,465.63
07-Nov-24	-3,713.67	-49,664.29	-440.86	-5,906.49
08-Nov-24	-5,635.45	-55,299.74	-668.05	-6,574.54

Data Source: NSDL

• In previous 7 rolling weeks, FPIs saw net outflows of $(979) Million, $(962) Million, $(2,259) Million, $(3,760) Million, $(3,124) Million; and net inflows of $2,832 Million and $696 Million. In the latest week to November 08, 2024 net FPI equity outflows were to the tune of $(2,375) Million; which is 6 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 ₹(55,300) Crore or $(6,575) Million; largely spoilt by the relentless sell-off in last 6 weeks.

The concerns, now, are how a new world order takes shape in Donald Trump’s America.

BIG TRIGGER NEXT WEEK – INFLATION STORY

India and the US are set to announce their consumer inflation for October 2024 in the coming week. While core inflation is likely to be a problem for the US inflation, the India inflation is already pegged higher at around 5.81%. That would only harden the RBI’s resolve to maintain status quo on repo rates, which could have a further impact on FPI outflows. Q2FY25 has shown that high interest rates are pinching and RBI needs to act swiftly.