Regardless of relentless selling by most foreign funds, long-term foreign funds continue to stay invested in Indian equities while their pace of selling remains milder than overall fund outflows, reported The Economic Times.
The cumulative share of long-term funds that include sovereign wealth funds, central banks of other countries, pension funds, and funds owned by government entities in Indian equities stood at 24.12% in June 2022, a gain of around 100 basis points in the last one year and 200 bps higher than pre-Covid period, NSDL data shows.
A higher share of sticky funds is mainly driven by sovereign wealth funds (SWF) and government-owned entities as they selectively participate in primary market offerings. SWFs’ share in the total Indian FPIs increased to 6.25% in June 2022, the highest in 17 months, while funds, where government entities hold more than 75% stake, saw their share rise to 6. 32%, a multi-year high level, the report said.
An increasing ratio of long-term funds will augur well for the health of Indian equities as they will lower redemption pressures in times of extreme risk aversion.
Foreign portfolio investors (FPIs) have pulled out about ₹2.65 lakh crore ($34. 73 billion) between October 2021 and July 2022 so far, trimming exposure to Indian equities for the tenth month in a row.
The selling has been primarily concentrated in the stock market route with total outflows reaching ₹3. 14 lakh crore ($41 billion).
FPIs have been net buyers in the stock markets of about ₹50,000 crore in the last 10 months where SWF and foreign equities participation remain higher.
For instance, SWF of Singapore was the anchor investor in the IPO of LIC and Delhivery, while Norway’s SWF also took a stake in LIC’s IPO.
The total equity assets under management (AUM) of FPIs dropped 6 percent YoY to ₹41.3 lakh crore in June 2022.
FPIs’ share in Indian equities dropped to around 18 percent of the total market capitalisation in June 2022, a drop of around 400 basis points in the last three years.