What FIIs bought and sold in Indian equities in November 2023?

6 Dec 2023 , 10:39 AM

If September marked the shift of FPI action from being net buyers to net sellers, then November saw that trend getting FPIs back as buyers. FPIs were net sellers to the tune of $1.78 billion in September, but the net FPI selling spiked by 66% to $2.95 billion in the month of October 2023. It may be recollected that in the 6 months between March 2023 and August 2023, FPIs had infused a total sum of $20.62 billion into Indian equities, of which $16.75 billion came between May, June, and July 2023. In that backdrop, the FPI selling in September and October 2023 does look relatively small. 

However, the focus is not on what has happened in the previous months, but how the FPI flows turned around in November. With the US inflation coming sharply lower and the US GDP sharply higher, the major concerns of Fed hawkishness and a hard landing are out of the way. That takes care of most of the global headwinds. But the big boost to FPI flows in November came after the GDP data was announced and the growth in GDP came in at 7.6% in real terms. This was affirmation that India was poised to be the fastest growing large economy in the current year also. The overall FPI buying was just about $1.08 billion, but it was the turnaround in the FPI sentiments that was really critical in this case. It began with IPO flows, but by the end of November, FPIs were buying heavily in secondary markets too.

What triggered the FPI turnaround in November 2023?

There were several reasons that triggered a turnaround in FPI sentiments in November; which started with aggressive buying in IPOs and extended to secondary markets too.

• US PCE inflation came in sharply lower at 3.0% while the US GDP growth for the third quarter of 2023 got upgrade by another 30 bps at 5.2%. This not only solves the inflation riddle, but also ensures that the US avoids a hard landing. It is like a salutary dual boost coming from the global markets. 

   

• While on the subject of global markets, even the US bond yields and the US dollar index (DXY) tapered further during the week. The US bond yields have now fallen 79 bps in a span of just about 4 weeks and that is a lot. Even the US dollar index is down from 107 to 103 levels and that is likely to be positive for the Indian rupee.

   

• The all important GDP data came out in November with real GDP growth at 7.6% in Q2. This is on top of 7.8% in Q2 and is likely to impel the RBI to upgrade its GDP growth forecast for FY24 from 6.5% to closer to 7%. Also, the nominal GDP was higher than the first quarter at 9.1%, led by construction, utilities, mining, and manufacturing.

   

• On the domestic front, there were two more key data points that supported the return of FPI flows. Core sector growth for October came in at 12.07%, marking the fifth month in succession of above 8% core sector growth. It is a good lead indicator for IIP and GDP. Also, the fiscal deficit update as of the end of October stays at 45% of full year target, implying that the government may manage to easily defend its 5.9% fiscal target.

   

• Finally, it was the IPO market that did the trick for FPI flows and that later spilt on to the secondary markets. Mega issues like IREDA, Tata Technologies, Gandhar Oil and Flair Writing Products were some of the big IPOs that got strong response from the FPIs. The IPO story is likely to be a major driver for FPI interest in India.

In the last few weeks, we had argued that inflation and growth remained major risks for FPI flows. The Indian economy is getting back into the Goldilocks effect of lower than expected inflation and higher than expected growth. That is just too salivating for global investors.

FPI AUC scales to all-time high of $675 billion in November 

Assets under custody (AUC) is the closing market value of all equities held by FPIs. The AUC is a function of flows and also the movements in the major stock market indices. Between September 2023 and October 2023, the FPI AUC had fallen by -3.41% from $651.19 billion to $628.96 billion. However, between October 2023 and November 2023, the FPI AUC has surged by 7.27% to $674.67 billion. Why this number is relevant is that it is higher than the earlier peak of $667 billion achieved on FPI AUC in October 2021. After a gap of over 2 years, the FPI AUC has once again scaled up, thanks largely to the index rally. The table below captures the top sectors in terms of FPI AUC as of November versus October.

Industry  Group	FPI AUC (Nov 2023) ($ billion)	FPI AUC (Oct 2023) ($ billion)
Financials (BFSI)	216.15	205.90
Information Technology (IT) Services	65.80	61.64
Oil & Gas	56.70	53.46
Fast Moving Consumer Goods (FMCG)	46.63	44.87
Automobiles and Auto Components	46.14	41.90
Healthcare and Pharmaceuticals	38.08	33.97
Capital Goods	29.79	26.39
Power (generation and transmission)	24.20	22.27
Consumer Durables	22.90	21.74
Consumer Services	20.49	17.71
Metals and Mining	19.37	17.92
Telecommunications	18.96	17.20
Construction	14.50	13.65
Cement	12.18	11.36
Realty	11.90	10.05
Chemicals	11.69	11.03
Services	11.47	10.60
Top 17 Sectors	666.93	621.64
Other 6 sectors	7.74	7.32
Total FPI AUC	674.67	628.96

Data Source: NSDL

The table above captures the top 17 sectors with AUC above $10 billion as of the close of November 2023. NSDL has pruned the list of sectors from 40 to 23. Out of these 23 sectors that FPIs invested in, AUC of the top-17 sectors accounted for 98.85% of total FPI AUC of $674.67 billion. The FPI AUC has scaled a new peak in this month, beating the earlier peak of the FPI AUC achieved in October 2021. Let us now turn to the specific sectors in terms of AUC and how they have moved over the previous month.

At $216.15 billion, it is the BFSI sector that has continued to dominate the AUC stakes. However, the AUC growth in the last month was visible more in NBFCs and insurance companies and less in banks. The other key sectors by AUC viz. IT, Oil, FMCG, automobiles, healthcare, and capital goods have all seen AUC getting a boost in November, thanks to the frenetic rally in the Nifty and Sensex, both of which are at all-time highs. The big gainers in terms of accretion in AUC included sectors like financials, IT, capital goods, automobiles, healthcare, and others. Let us turn to the sectors where FPIs were buyers or sellers.

FPI buying in November 2023 driven by IPO flows

In a month when the FPI action only turned positive in the last few days of the month, there would be substantially larger number of sectors where FPIs sold out. Here is a sectoral break-up of the positive net FPI inflows into Indian equities in November 2023, with the colour of flows broken into first half and second half of November; with overall flows too.

FPI Flows  Into Sectors	H1-Nov 23  ($ million)	H2-Nov 23  ($ million)	Nov-23  ($ million)
Others (Honasa, IREDA)	650	79	729
Consumer Services	101	424	525
Capital Goods	-26	454	428
Healthcare	136	43	179
Realty	30	103	133

Data Source: NSDL

The buying was limited and that is obvious in a month when the FPI buying came only in the last week. However, the others category in the above table shows the IPO flows from FPIs, especially into IPOs like Honasa Consumer, Tata Technologies and IREDA. In addition, the other sectors like capital goods, consumer goods and healthcare also saw targeted buying. 

FPIs net sell Financials, Power and FMCG in November 2023

Here is a sectoral break-up of the FPI outflows from Indian equities in the month of November 2023, with the colour of flows broken into the first half and second half of the month, for a more granular picture.

FPI Flows  Out of Sectors	H1-Oct 23  ($ million)	H2-Oct 23  ($ million)	Oct-23  ($ million)
Financial Services	-188	-291	-479
Power Sector	-167	-188	-355
FMCG Sector	-127	-77	-204
Construction	-39	-69	-108

Data Source: NSDL

During the month of November 2023, FPI selling was quite rampant and that was hardly surprising, considering that FPI sentiments only turned around in the second half of November. Here are the key sectors that saw heavy selling in the month of November 2023.

• Financial services saw the maximum selling of $479 million. That is not surprising considering that BFSI is the sector with a third of the FPI weight in India. But, that misses the point. Banks are under pressure after NII growth faltered in this quarter and the NIMs started to come back to more normalized levels. However, macro level buying was visible in BFSI stocks towards the end of the month.

   

• Power and FMCG saw heavy selling from the FPIs. Power is more of profit booking at higher levels as these stocks have rallied sharply. Stocks like NTPC have rallied very sharply in the last few weeks and some offloading was on the cards. The FMCG sector saw selling on the back of concerns over rural demand and a likely impact on the margins of FMCG companies.

   

• Oil & Gas saw another $362 million of selling in the month. Selling was seen in Reliance after the quarterly results as also upstream stocks came under pressure on windfall tax concerns. Downstream oil companies are expected to be under stress due to thinning marketing margins for oil marketers.

   

• Realty has been attracting buying interest in the last few months and the month of November has seen some offloading by the FPIs. That looks more like profit booking after a very frantic rally in these stocks.

Overall, it was a month when selling dominated the first 3 weeks of the month but buying came back with a vengeance in the last week. It was just that the market found itself in a very sweet spot, with all the domestic and global cues falling in place.

Big picture on FPI flows for November 2023

Here is how the FPI flows up to end-November 2023 on a cumulative basis looked like. We are talking flows across IPOs, secondary equities, hybrids, and debt.

Calendar  Month	FPI Flows Secondary	FPI Flows Primary	FPI Flows Equity	FPI Flows Debt/Hybrid	Overall FPI Flows
Calendar 2022	(146,048.38)	24,608.94	(121,439.44)	(11,375.78)	(132,815.22)
Jan-2023	(29,043.32)	191.30	(28,852.02)	2,308.27	(26,543.75)
Feb-2023	(5,583.16)	288.85	(5,294.31)	1,155.19	(4,139.12)
Mar-2023	7,109.65	825.98	7,935.63	-2,036.42	5,899.21
Apr-2023	9,792.47	1,838.35	11,630.82	1,913.97	13,544.79
May-2023	38,093.11	5,745.00	43,838.11	4,491.44	48,329.55
Jun-2023	45,736.71	1,411.63	47,148.34	9,109.36	56,257.70
Jul-2023	37,292.82	9,324.94	46,617.76	1,359.32	47,977.08
Aug-2023	9,232.57	3,029.71	12,262.28	6,075.54	18,337.82
Sep-2023	(14,576.40)	(191.10)	(14,767.50)	957.11	(13,810.39)
Oct-2023	(28,299.00)	3,751.34	(24,547.66)	6,672.20	(17,875.46)
Nov-2023	(368.40)	9,369.18	9,000.78	15,545.63	24,546.41
Dec-2023 #	18,221.33	2,742.14	20,963.47	2,643.71	23,607.18
Total for 2023	87,608.38	38,327.32	1,25,935.70	50,195.32	1,76,131.02
# – October Data is up to December 05, 2023

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

FPIs sold $4.50 billion in equities in September and October 2023; but this is in the backdrop of $21 billion inflows in the six months to August. The global headwinds are largely addressed now, and domestic cues on inflation, GDP growth and fiscal deficit are favourable. November saw strong FPI inflows into IPO and secondary markets.

What is the overall picture as of December 05, 2023? With less than a month to go for 2023 to conclude, FPIs have infused Rs1,25,936 crore into Indian equities. Their total infusion into equity and debt combined was Rs1,76,131 crore. This is after offsetting FPI selling in January, February, September, and October 2023. FPI inflows in 2023 more than offset the selling of 2022. The real good news is that FPI assets under custody (AUC) is again at a life-time high!