What FIIs bought and sold in India in December 2022?

5 Jan 2023 , 12:02 PM

For the year overall, the FPIs withdrew Rs1.21 trillion from Indian equities. However, if you break up the year into two halves, then H1-2022 saw net FPI selling of Rs2.17 trillion while H2-2022 saw net FPI buying of Rs0.96 trillion resulting in overall FPI selling in 2022 at Rs1.21 trillion. After FPIs infused an impressive $4.45 billion in November 2022, the December 2022 inflows into equities were relatively subdued to the tune of $1.35 billion. In December 2022, FPI infused $1.09 billion in the first half of the month and $260 million in the second half of December.

Between October 2021 and June 2022, FPIs had withdrawn $34 billion from Indian equities in 9 months of sustained selling. However, FPIs infused $8 billion between July 2022 and December 2022, resulting in net inflows of $26 billion in the last 15 months since the Nifty and Sensex saw its first major peak.

Charting sector-wise Assets under custody (AUC)

The assets under custody (AUC) is a function of flows and also stock market performance. AUC of FPIs had peaked at $667 billion in October 2021 and fell to a low of $523 billion in June 2022. Between June 2022 and November 2022, the AUC rallied by 16.8% to $611.11 billion; helped by a mix of positive inflows and a rally in the Nifty and Sensex. The market correction in December 2022, took the AUC lower to $583.97 billion and as of the close of 2022, the FPI AUC still remains 12.5% below the peak. Here is the AUC standing, sector-wise, as of the close of December 2022.

Industry  Group	Assets Under Custody (AUC)  of FPIs – $ Billion (Dec 2022)
Financials	192.44
Oil & Gas	66.81
IT Services	61.02
FMCG	39.72
Automobiles	31.23
Healthcare and Pharma	28.06
Power	25.16
Metals & Mining	20.85
Consumer Durables	19.61
Capital Goods	15.54
Telecom	15.25
Consumer Services	14.14
Chemicals	12.04
Cement	10.00
Top 14 Sectors	551.86
Other 9 sectors	32.11
Total FPI AUC	583.97

Data Source: NSDL

The table above captures the top 14 sectors with AUC above $10 billion. NSDL has pruned the list from 40 sectors to 23 sectors. Out of these 23 sectors that FPIs invested in, AUC of the top-14 sectors accounted for 94.5% of total FPI AUC of $583.97 billion. The December 2022 AUC at $583.97 billion is down -4.44% compared to the November 2022 AUC. 

Financials, comprising banks, NBFCs and insurance accounted for 32.95% of overall FPI AUC, roughly corresponding to their weight in Nifty. The other significant AUC contributors were Oil & Gas $66.81 billion, Information Technology $61.02 billion, FMCG $39.72 billion, Automobiles $31.23 billion, Healthcare $28.06 billion, Power $25.16 billion and Metals & Mining at $20.85 billion. Barring FMCG, which saw stable AUC and metals that saw AUC rising, all other sectors witnessed depletion in AUC in December 2022.

FPIs flows in December 2022: Customer facing sectors attract flows

FPI flows in December 2022 was again positive at $1.35 billion, with the sectors with positive flows outnumbering the sectors with negative flows. It was a positive month with $1.09 billion of buying in the first half of the month and $260 million of buying in the second half of the month. FPIs continue to be wary of two heavyweight sectors viz. IT and Oil & Gas.

The broad theme of FPI buying appears to be a bet on customer facing sectors. In an uncertain global environment, FPIs are focusing more on domestic driven sectors, which is also driving FPI flows. FMCG attracted $486 million while consumer durables attracted $442 million. Among other sectors, realty saw inflows of $394 million while financial services got $314 million. In short, the top 4 sectors attracting positive flows in December were all domestic-demand driven consumer focused sectors. In addition, capital goods and metals / mining also attracted positive flows on hopes of a post-COVID Chinese revival.

FPIs remained wary of IT and Oil & Gas in December 2022

There were 2 heavyweight sectors that accounted for bulk of the outflows. IT sector saw outflows of $433 million while the Oil & Gas sector saw outflows of $337 million. Let us look at the IT sector first. The sector has been under pressure due to fears of a global slowdown with JP Morgan indicating that revenue growth could fall from mid-teens to around 8% levels. The weak economic growth globally could also hit tech spending and the pricing power of IT companies. Even if IT companies get over their cost problems, the top line is going to be an issue. For the oil sector, the concerns are two-fold. Higher oil prices are expected to add to the subsidy burden of downstream oil companies. At the same time, the upstream oil companies are likely to be hit by the windfall tax on domestic output and exports.

Apart from IT and Oil; other sectors that also saw selling in the month of December 2022 were power, telecom and consumer durables. The overall FPI theme for December 2022 was long on domestically dependent companies and short on globally exposed companies.

Tracking FPI flows into India in calendar 2022

Calendar Year  2021 and 2022	FPI Flows –  Secondary Markets	FPI Flows –  IPOs	Overall  FPI Flows	Cumulative  FPI Flows
Year 2021	-7,070.50	+10,830.64	+3,760.14	+3,760.14
January 2022	-4,437.78	-22.04	-4,459.82	-4,459.82
February 2022	-5,144.48	+402.23	-4,742.25	-9,202.07
March 2022	-5,244.75	-140.19	-5384.94	-14,587.01
April 2022	-2,180.02	-56.21	-2,236.23	-16,823.24
May 2022	-5,860.97	+682.78	-5,178.19	-22,001.43
June 2022	-6,429.51	-7.09	-6,436.60	-28,438.03
July 2022	-4.58	+622.63	+618.05	-27,819.98
August 2022	+5,949.25	492.70	+6,441.95	-21,377.05
September 2022	-904.25	+1.17	-903.08	-22,280.13
October 2022	-99.30	+98.78	-0.52	-22,280.65
November 2022	+4,002.82	+422.84	+4,425.66	-17,854.99
December 2022	+766.66	+588.49	+1,355.15	-16,499.84

Data Source: NSDL (all figures in $ million)

With year 2022 done and dusted, cumulative FPI net outflows stood at $16.5 billion. That sounds intimidating but is a lot better compared to the $28.5 billion of selling seen in the first  half of the year. Steady net FPI inflows of $12 billion in the second half of the year acting as a redeeming factor. Calendar 2022 has closed with record FPI outflows, but there are several reasons why year 2023 could be better for FPI flows.

Firstly, risk-on investing is gradually coming back and once there is clarity on the levels at which US rates will top out, you could see the FPI flows into EMs like India intensifying. Secondly, passive flows have been quiet for the last one year and there is likely to be some revenge buying from these index funds and global index ETFs. Thirdly, the theme will continue to be long on domestic plays and short on global plays. That is unlikely to change in the year 2023. Apart from all these factors, the robust India growth story; being the fastest growing large economy, will sustain interest in India. Hopefully, a more positive and reform oriented Union Budget can work wonders for now.