Weekly Musings – FPI flows for week ended November 15, 2024

18 Nov 2024 , 09:19 AM

TRUNCATED WEEK SEES SUBDUED FPI SELLING

It was, probably, a case of FPIs taking a pause in a truncated week, but the FPI selling in the latest week at $288 Million was sharply lower than previous weeks. In the last 6 weeks since the start of October, FPIs have sold $14 Billion of equities in the Indian markets. It could have been a lot worse, had it not been for more than $3.5 Billion infused into IPOs in this period. If October was a month of heavy FPI selling, November 2024 has started off on a rather tentative note and are awaiting more pronouncements from Donald Trump. FPI selling in BFSI continues in November, although the intensity of selling is sharply lower than what we saw in October 2024. But, clearly, the sentiments continue to be negative.

Some of the data flows have not been too positive in the recent week. India reported a surge in consumer inflation which is likely to hold the RBI from cutting rates in December. That means; we can now expect rate cuts in February 2025 or beyond. Secondly, the trade deficit on the goods account came in sharply higher at $27.14 Billion. The current account deficit for the full year now promises to be in the range of 2.1% to 2.2% of GDP, which is slightly on the higher side. Thirdly, all eyes will be on the Q2FY25 GDP growth to be announced towards the end of November. If that shows the lag effect of weak urban demand, then the FPI selling in Indian markets could intensify. We need to wait and watch!

MACRO FPI FLOW PICTURE UP TO NOVEMBER 15, 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) #	(32,351.27)	9,930.96	(22,420.31)	(3,922.78)	(26,343.09)
Total for 2024 (₹ Crore)	(1,11,656.07)	95,828.00	(15,828.07)	1,50,760.56	1,34,932.49
For 2024 ($ Million)	(13,526.33)	11,452.98	(1,803.35)	18,088.12	16,284.77
# – Recent Data is up to November 15, 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. One only needs to look at the numbers. Out of the total net FPI flows of ₹1.35 Trillion, FPI infusion in debt was ₹1.51 Trillion, while equities saw net FPI outflows despite the robust response from FPIs in the IPO market. The net FPI inflow of $16.28 Billion in 2024 till date is comprised of FPI inflows into debt of $18.09 Billion and $(1.80) Billion of net FPI outflows from equities. If you look at the break-up of this $(1.80) Billion equity outflow in 2024, secondary market equities saw net selling of $(13.53) Billion, while the IPOs saw FPI infusion of $11.45 Billion in 2024, so far.

FPI SENTIMENTS – THE WEEK THAT WAS

For the latest week to November 15, 2024, FPIs were net sellers for the sixth week in a row at $(288) Million. Here is what drove FPI sentiments in the week.

• The big overhang on FPI sentiments was the combination of the China story and Trump becoming the next president of the US. For example, the massive China stimulus has resulted in a sustained Sell-India / Buy-China trade. It remains to be seen if Trump persists on imposing tariffs on imports, but if that happens, then it is going to pose a few problems for India.
• India reported its consumer and wholesale inflation during the week. Consumer inflation hardened to 6.21% in October while the wholesale (WPI) inflation also hardened to 2.36% for October 2024. In both the cases, the driving factor for higher inflation was the food basket. However, in the case of WPI inflation, there was also pressure on the manufacturing basket which went up from 1.0% to 1.5% in October 2024. Overall, food prices were pushing inflation higher, even as the core basket remained sticky.
• The week also saw the US consumer inflation come in higher by 20 bps at 2.6%. In the case of the US, food inflation was down and core inflation was flat, but the pressure came from the hardening of energy inflation. Of course, the Fed considers the PCE inflation for its rate decisions, although this does set the tone for PCE inflation. The net result is that the CME Fedwatch now expects the Fed to complete 100 bps rate cut in 2024 but subsequently go slow in 2025.
• India also announced the growth in index of industrial production (IIP) for September 2024, which is normally presented with a gap of one month. After contracting in August, the IIP was back in positive territory at 3.09%. That was essential as there were concerns that the government going slow on capex was hitting core sector and IIP. Hopefully, that is not the case, but we need to await more data points before getting a confirmation. The month of September saw a spike in mining, manufacturing, and electricity output.
• Merchandise trade deficit for October 2024 widened to $27.14 Billion as imports surged faster than exports. The services surplus was also higher, but the net overall deficit was still above $10 billion for October. The latest cues indicate that current account deficit for FY25 could now be closer to 2.1% or 2.2% of GDP, although we have to await the Q2FY25 CAD towards the end of December 2024.
• The USDINR will be in focus with the RBI intervening heavily, as is evident from the sharp fall in the forex reserves. A recent report by SBI Research has hinted at the possibility of another 10% correction in the Indian rupee. As long as the rupee remains vulnerable, FPI selling is likely to persist

The coming week will be a data light week, so the action will revolve more around variables like the bond yields, USDINR, and crude oil prices.

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
21-Oct-24	-5,143.98	-5,143.98	-611.86	-611.86
22-Oct-24	10,709.59	5,565.61	1,273.82	661.96
23-Oct-24	-3,827.33	1,738.28	-455.25	206.71
24-Oct-24	-4,990.74	-3,252.46	-593.60	-386.89
25-Oct-24	-4,836.55	-8,089.01	-575.27	-962.16
28-Oct-24	-3,027.21	-11,116.22	-360.05	-1,322.21
29-Oct-24	-2,109.20	-13,225.42	-250.87	-1,573.08
30-Oct-24	-892.63	-14,118.05	-106.17	-1,679.25
31-Oct-24	-2,197.62	-16,315.67	-261.36	-1,940.61
01-Nov-24	0.00	-16,315.67	0.00	-1,940.61
04-Nov-24	-4,343.53	-20,659.20	-516.54	-2,457.15
05-Nov-24	-4,561.75	-25,220.95	-542.38	-2,999.53
06-Nov-24	-1,739.29	-26,960.24	-206.75	-3,206.28
07-Nov-24	-3,713.67	-30,673.91	-440.86	-3,647.14
08-Nov-24	-5,635.45	-36,309.36	-668.05	-4,315.19
11-Nov-24	-3,553.45	-39,862.81	-421.15	-4,736.34
12-Nov-24	-364.35	-40,227.16	-43.17	-4,779.51
13-Nov-24	2,843.31	-37,383.85	336.88	-4,442.63
14-Nov-24	-1,352.13	-38,735.98	-160.20	-4,602.83
15-Nov-24	0.00	-38,735.98	0.00	-4,602.83

Data Source: NSDL

• In previous 7 rolling weeks, FPIs saw net outflows of $(2,375) Million, $(979) Million, $(962) Million, $(2,259) Million, $(3,760) Million, $(3,124) Million; and net inflows of $2,832 Million. In the latest week to November 15, 2024 net FPI equity outflows were to the tune of $(288) Million; which is 7 consecutive weeks of FPI selling in Indian equities.
• If you look at the last 4 rolling weeks on a cumulative basis, total net FPI outflows from equities were to the tune ₹(38,736) Crore or $(4,603) Million; largely spoilt by the relentless sell-off in last 6 weeks.

The focus now shifts to the specific announcements made by Donald Trump and how it will impact India. For now, there are fundamental concerns in India over inflation, quarterly numbers, and valuations. That is not changing in a hurry. In relative terms, China is looking more reasonably valued and is also making the right macro noises. Above all, a lot will depend on how Trump 2.0 goes about his job!