What FIIs bought and sold in India in March 2023?

10 Apr 2023 , 08:51 AM

For a long time, FPI flows were the sole driver of market direction. Not any longer! With LIC and domestic mutual funds building heft, they are acting as a strong counteractive force for FPI selling. In calendar 2022, FPIs sold equities worth $16 billion but Nifty ended nearly 4% higher. However, FPIs continue to hold an inordinate sway over Indian markets as they impact the equity market and also the currency; so, the impact is a double whammy.

Year 2023 started off with FPIs back on selling mode. January 2023 saw total FPI selling of $3.54 billion. In comparison, the selling in February 2023 was relatively subdued at $639 million. With nearly $4.20 billion of equity selling in the first two months, the month of March did come as a whiff of fresh air. FPIs actually bought into equities in March to the tune of $966 million. However, that does not tell the full story. There was an inflow of $1.90 billion in one day in early March when GQG invested in Adani group companies. If that deal is excluded, FPIs were net sellers in March. First, a look at FPI assets under custody (AUC).

Sector-wise assets under custody (AUC) story for March 2023?

Assets under custody (AUC) is the closing market value of all the equities held by FPIs. AUC depends on the FPI flows and also on the stock market performance. It may be recollected that the AUC of FPIs had peaked at $667 billion in October 2021. From that point, the AUC of FPIs fell to as low as $523 billion in June 2022. After bouncing back to $611 billion in November 2022, the FPIs AUC has been on a consistent downtrend since.

From $611 billion FPI AUC in November 2022, it has progressively fallen to $584 billion in December 2022, $563 billion in January 2023 and to $535 billion in February 2023. In March 2023, the GQG infusion, combined with a late Sensex rally, led to a recovery in FPI AUC to $542 billion. However, it must be said that the FPI AUC figure is now fairly close to the June 2022 lows. Here is a picture of the FPI AUC as of March 2023.

Industry  Group	FPI AUC (Mar 2023) ($ billion)	FPI AUC (Feb 2023) ($ billion)
Financials (BFSI)	181.94	180.76
Information Technology (IT) Services	59.52	61.86
Oil & Gas	54.80	54.52
Fast Moving Consumer Goods (FMCG_	40.47	39.08
Automobiles and Auto Components	30.77	31.58
Healthcare and Pharmaceuticals	26.83	26.58
Power (generation and transmission)	18.14	14.97
Consumer Durables	18.09	18.07
Capital Goods	16.60	16.43
Metals and Mining	15.88	14.37
Telecommunications	13.61	13.74
Consumer Services	12.58	12.46
Chemicals	11.48	11.23
Cement	10.03	9.42
Top 14 Sectors	510.73	505.06
Other 9 sectors	31.56	29.65
Total FPI AUC	542.29	534.71

Data Source: NSDL

The table above captures the top 14 sectors with AUC above $10 billion as of March 2023. 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 94.18% of total FPI AUC of $542.29 billion. The February 2023 AUC at $542.29 billion is up 1.42% compared to February 2023. 

The BFSI space, comprising of banks, NBFCs and insurance accounted for 33.55% of overall FPI AUC. In absolute terms, there has been a mixed reaction across sectors. For instance, the heavy BFSI sector managed to improve its overall AUC marginally. Among solid gainers in AUC for the month of March 2023 were FMCG, Power, Metals & Mining and cement. Among the sectors that saw depletion in AUC were IT and the automobiles sector.

Apart from BFSI, the other significant AUC contributors were Information Technology $59.52 billion, Oil & Gas $54.80 billion, FMCG $40.47 billion, Automobiles $30.77 billion, Healthcare $26.83 billion, and Power $18.14 billion. The surge in power sector AUC can be attributed to the GQG mega investment in the Adani group power companies.

Adani group businesses drive FPI inflows in March 2023

Where FPI money flowed in	Where FPI money flowed out
Sector	Amount ($ million)	Sector	Amount ($ million)
Services	+879	Information Technology	-839
Power	+390	Oil and Gas	-829
Metals & Mining	+357	Healthcare	-192
Automobiles	+327	Financial Services	-69
Capital Goods	+305	Telecommunications	-56
Construction	+270	Textiles	-41
FMCG	+214	Media, Entertainment	-39

Data Source: NSDL

Let us first focus on sectors getting positive flows from FPIs in March 2023. Services led the way with $879 million of inflows followed by power sector inflows at $390 million. Both these sectors were led by inflows from GQG Investments into Adani Enterprises and other power companies of Adani group like Adani Green, Adani Transmission etc. The Adani story literally accounted for bulk of the FPI inflows in March 2023. 

But there were other pockets of interest too. Metals got FPI inflows of $357 million while automobiles got inflows of $327 million. While metals gained on China revival hopes, Automobiles were more a play on the India story. FMCG was also a similar play. Capital goods also got inflows of $305 million as stocks like L&T attracted a lot of hopes that capital cycle would finally revive in India. Overall, the FPI positive flows outnumbered the negative flows in March 2023.

FPIs sell heavily in IT and oil & gas

IT and hydrocarbons (oil & gas) accounted for bulk of the selling by FPIs in March 2023. For instance, the IT sector saw FPI selling of $839 million while the oil and gas sector saw FPI selling of $829 million. What explains such heavy selling in a generally positive month? IT is where most FPIs continue to be wary and ahead of the results season, the FPIs prefer to stay light on IT. It is expected that the impact of weak tech spending and contract pricing pressures would tell on margins in the coming quarter also. On the oil and gas front, there has been selling in Reliance, while the PSU downstream companies also saw selling on expectations of a bounce in oil prices. Among other sectors, healthcare saw some selling pressure from FPIs in the month of March 2023.

A quick look at FPI flows break up in March 2023

Calendar  Month	FPI Flows Secondary	FPI Flows Primary	FPI Flows Equity	FPI Flows Debt/Hybrid	Overall FPI Flows
Full Year 2022	(146,048.38)	24,608.94	(121,439.44)	(11,375.78)	(132,815.22)
January 2023	(29,043.32)	191.30	(28,852.02)	2,308.27	(26,543.75)
February 2023	(5,583.16)	288.85	(5,294.31)	1,155.19	(4,139.12)
March 2023	7,109.65	825.98	7,935.63	(2,036.42)	5,899.21
Total for 2023	(27,516.83)	1,306.13	(26,210.70)	1,427.04	(24,783.66)

Data Source: NSDL (all figures are Rupees in crore). Negative figures in brackets

What are the key takeaways from the month-wise FPI numbers for March 2023. Firstly, if we compare CY22 and CY23, the big difference is the IPO flows. The big IPOs are missing in 2023 and that means even the big FPI bets on IPOs are missing. But, above all, the FPI selling pressure is coming from relatively unfavourable macros and that is unlikely to change in a hurry. That includes a mix of global and domestic macros.

At a global level, the Fed hawkishness, fears of global recession and the evolving global banking crisis are likely to keep FPIs on tenterhooks. At a domestic level, the real challenges lie in persistent consumer inflation, the deficit situation and pressure on corporate bottom lines due to rising interest costs. With plethora of headwinds, FPI flows may be under pressure in the near future.