scorecardresearchForeign funds' stake in domestic equities is at its lowest level in 3 years: Report

Foreign funds' stake in domestic equities is at its lowest level in 3 years: Report

Updated: 09 May 2022, 09:29 AM IST
TL;DR.

Apart from India, other emerging markets, including Taiwan, Korea and the Philippines also saw massive outflows so far, this fiscal.

Foreign investors have pulled over  <span class='webrupee'>₹</span>6,400 crore from the Indian equity market in the first four trading sessions of the current month.

Foreign investors have pulled over 6,400 crore from the Indian equity market in the first four trading sessions of the current month.

Foreign funds’ ownership in domestic equities fell to pre-COVID lows and hit a multi-year low of 19.5 per cent in March this year in NSE500 companies valued at USD 619 billion, shows an analysis.

FPI ownership is at its lowest level in three years, at 19.5 per cent in March 2022, compared to 19.3 per cent in March 2019 (pre-COVID period).

According to a study by Bank of America Securities India, the FPI ownership was at 21.2 per cent in March 2021, the second-highest on record.

Foreign funds’ ownership in the domestic equities was at 18.6 per cent in December 2017, the lowest in five years, and the peak was in December 2021, when they owned 21.4 per cent of domestic equities.

Energy stocks received the biggest incremental allocation of 16.2 per cent of the USD 619 billion in FPI ownership, followed by IT (14.8 per cent) and communication services (4 per cent), the report said.

In overall allocation, financials still led the chart with 31.4 per cent followed by discretionary (9 per cent).

Apart from India, other emerging markets, including Taiwan, Korea and the Philippines also saw massive outflows so far, this fiscal.

According to the report, March alone saw the sixth consecutive month of FPI outflows, which was the most severe since March 2020 (after the pandemic scare) on the back of continued geopolitical risks, elevated inflation led by supply-side issues, and rising commodity costs.

The record fall was mainly due to the massive outflows of USD 5.4 billion in March and a whopping USD 15.7 billion in FY22. Such a massive pull-out came after they pumped in USD 23 billion in 2020 and USD 3.7 billion in 2021.

Even amidst the pull-out emerging market funds have been steadily increasing their allocation to India (19 per cent in March vs 13.3 per cent in January 2021) as against China (34.6 per cent in March vs 42.2 per cent in January 2021).

Furthermore, foreign investors have pulled over 6,400 crore from the Indian equity market in the first four trading sessions of the current month.

Article
Foreign portfolio investors (FPIs) have been on a selling spree in the Indian market, exceeding the global financial crisis (GFC) outflow of 2008-09. However, the market benchmark Sensex has not reacted to the FPI selling as it used to in the past. Data from NSDL show that FPIs have sold equities worth 1,41,507 crore in the Indian equities in the financial year 2022 (FY22) so far. Cumulatively, they have withdrawn 1,19,950 crore from the Indian financial market instruments, which includes equities, debt, debt-VRR (voluntary retention route) and hybrid category. The data show, FPIs have sold only equities and bought in debt, debt-VRR and hybrid categories in FY22 so far.
First Published: 09 May 2022, 09:29 AM IST