Weekly Musings – FPI flows for week ended November 22, 2024

25 Nov 2024 , 11:25 AM

TRUNCATED WEEK SEES REDUCED FPI SELLING

It is something that has never happened before that FPIs were net sellers for 37 days in a row. This was another truncated week with just 4 days of trading. November 20, 2024 was a trading holiday on account of the assembly elections in Maharashtra and that helped the FPI selling to be subdued at about $388 Million in the week. The last 2 weeks have been relatively subdued in terms of FPI selling, which is a welcome relief after relentless selling by FPIs since the start of October. The week also saw some of the immediate risks like China attractiveness and tensions in West Asia fading. That reduced the rush out of Indian equities. Since the start of October, FPIs have sold $14.4 Billion; and that is quite a lot. Also, if West Asia risks are abating, there are new risks coming up elsewhere.

The conditions worsened in the Russia-Ukraine war with Joe Biden allowing Zelensky to use US rockets to fire inside Russian territory. However, during the week, the situation escalated with Russia responding with ICBM (intercontinental ballistic missiles). Russia firing an ICBM has two clear implications. Firstly, a typical ICBM has a range of up to 10,000 KM. The firing of the ICBM was a signal to the NATO countries that “push comes to shove;” Russia would not hesitate to use ICBMs at Ukraine and even other supporters of the West. Secondly, these ICBM can fitted with nuclear warheads and Russia has the power to do both. That should serve as warning signal that Russia can retaliate in a nasty manner.

MACRO FPI FLOW PICTURE UP TO NOVEMBER 22, 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) #	(41,872.83)	15,339.53	(26,533.30)	(7,004.74)	(33,538.04)
Total for 2024 (₹ Crore)	(1,21,177.63)	1,01,236.57	(19,941.06)	1,47,678.86	1,27,737.54
For 2024 ($ Million)	(14,384.17)	12,093.37	(2,290.80)	17,722.91	15,432.11
# – Recent Data is up to November 22, 2024

Data Source: NSDL (Negative figures in brackets)

Unlike in the year 2022 and 2023, it is debt flows of FPIs that entirely dominated 2024. One only needs to look at the numbers. Out of the total net FPI flows of ₹1.28 Trillion, FPI infusion in debt was ₹1.48 Trillion, while equities saw net FPI outflows despite the robust response from FPIs in the IPO market. The net FPI inflow of $15.43 Billion in 2024 till date is comprised of FPI inflows into debt of $17.72 Billion and $(2.29) Billion of net FPI outflows from equities. If you look at the break-up of this $(2.29) Billion equity outflow in 2024, secondary market equities saw net selling of $(14.38) Billion, while the IPOs saw FPI infusion of $12.09 Billion in 2024, so far.

FPI SENTIMENTS – THE WEEK THAT WAS

For the latest week to November 22, 2024, FPIs were net sellers for the seventh week in a row at $(388) Million. Here is what drove FPI sentiments in the week.

• With Joe Biden approving the use of American weapons by Ukraine on Russian soil, things just got uglier in the Ukraine war. Russia responded by firing an intercontinental ballistic missile (ICBM) with a range of 10,000 KM into neighbouring Ukraine. This should also serve as a warning signal to Europe that the oil situation could get a lot worse. While nuclear war may be avoided this time around, it reminds markets that the risk of a nuclear war may not be too far off for Russia.
• The US Securities Exchange Commission (SEC) and the US Department of Justice (DOJ) have pulled up Gautam Adani and other directors for not making appropriate disclosures regarding the ongoing fraud investigations being conducted by the US SEC. It remains to be seen how much of jurisdiction the global regulator has in India. However, the damage to the Adani group stocks in the last one week was just unmissable.
• The Mahayuti party comprising of the BJP / NDA, Shinda faction of Shiv Sena, and the Ajit Pawar faction of NCP appears to be emerging the undisputed winner in the Maharashtra state elections. At mid-day on Saturday, the ruling Mahayuti was leading in 213 out of the 288 seats in the Maharashtra assembly almost giving them a two-third majority. In the other case of Jharkhand, the state is being swept by the Congress / JMM combine; as per early indications coming from the state. Once again, it was a case of exit polls getting the extent of the victory entirely wrong in both cases.
• India plans to offer an additional $5 billion as production linked incentives (PLI) to the manufacturers of electronic components and equipment. These electronic products are being directly imported from China, so this should also help to reduce the dependence on China and hit two birds with one stone. These incentives are likely to apply to companies that manufacture components for mobile phones, PCs, and laptops.
• Amidst the tumult in the secondary markets, Indian IPOs have been managing to sail through quite convincingly. The recent mega IPO of NTPC Green Energy Ltd (NGEL) concluded on Friday with 2.42 times subscription overall. While the QIB portion got subscribed 3.32 times, the retail portion was subscribed 3.44 times. HNI subscriptions fell short, but that was expected in the absence of funding applications flowing in.
• One negative point in the week was the sharp fall in forex reserves by $17.5 Billion. At $657 Billion the forex reserves are nearly 10% down from the peal level of $715 Billion recorded more than a month back. The sharp fall in the forex reserves has been triggered by sharp outflows by FPIs as well as persistent RBI intervention to hold the USDINR at around 84.50/$.

The coming week will be a data heavy week with India Q2 GDP, India fiscal deficit and core sector as well as US Q3 GDP and PCE inflation to be announced.

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
28-Oct-24	-3,027.21	-3,027.21	-360.05	-360.05
29-Oct-24	-2,109.20	-5,136.41	-250.87	-610.92
30-Oct-24	-892.63	-6,029.04	-106.17	-717.09
31-Oct-24	-2,197.62	-8,226.66	-261.36	-978.45
01-Nov-24	0.00	-8,226.66	0.00	-978.45
04-Nov-24	-4,343.53	-12,570.19	-516.54	-1,494.99
05-Nov-24	-4,561.75	-17,131.94	-542.38	-2,037.37
06-Nov-24	-1,739.29	-18,871.23	-206.75	-2,244.12
07-Nov-24	-3,713.67	-22,584.90	-440.86	-2,684.98
08-Nov-24	-5,635.45	-28,220.35	-668.05	-3,353.03
11-Nov-24	-3,553.45	-31,773.80	-421.15	-3,774.18
12-Nov-24	-364.35	-32,138.15	-43.17	-3,817.35
13-Nov-24	2,843.31	-29,294.84	336.88	-3,480.47
14-Nov-24	-1,352.13	-30,646.97	-160.20	-3,640.67
15-Nov-24	0.00	-30,646.97	0.00	-3,640.67
18-Nov-24	-1,493.00	-32,139.97	-176.89	-3,817.56
19-Nov-24	-2,028.21	-34,168.18	-240.34	-4,057.90
20-Nov-24	0.00	-34,168.18	0.00	-4,057.90
21-Nov-24	-1,917.71	-36,085.89	-227.21	-4,285.11
22-Nov-24	1,325.93	-34,759.96	256.99	-4,028.12

Data Source: NSDL

• In previous 7 rolling weeks, FPIs saw net outflows of $(288) Million, $(2,375) Million, $(979) Million, $(962) Million, $(2,259) Million, $(3,760) Million, and $(3,124) Million. In the latest week to November 22, 2024 net FPI equity outflows were to the tune of $(388) Million; which is 8 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 ₹(34,760) Crore or $(4,028) Million; with the shift in trend clearly negative over the last 5 weeks.

The focus now shifts to the specific announcements on data like the India Q2 GDP data, the core sector growth, and the fiscal deficit. Also, the US will announce PCE inflation and Q3 GDP second estimates in the coming week. It does promise to be an action packed week for FPIs, although the outcome of the Maharashtra elections should be positive for FPI sentiments.