What FIIs bought and sold in India in July 2022?

8 Aug 2022 , 10:00 AM

The total FPI inflow of $634 million would look paltry in comparison to the $35 billion of equities that FPIs have sold since October 2021. However, it gives hope that the trend of persistent FPI selling may have been finally reversed. Of course, we need to wait for more confirmation from FPI flows in the next few months. The impact of the market rally was also visible in the Assets under Custody (AUC) of the FPIs. It had fallen from $667 billion in October 2021 to $523 billion at the end of June 2022. In July it picked up to $569 billion. It is still way below the peak but the bounce amidst such challenging global conditions is surely a feel-good factor.

To understand the extent of the shift, look at FPI flows since the start of 2022. In January 2022, FPIs sold $4.46 billion of equities and $4.71 billion in February 2022. In March 2022, FPIs sold $5.38 billion, while April 2022 saw subdued FPI selling at $2.36 billion. However, net FPI selling in equities surged to $5.16 billion in May 2022 and $6.39 billion in June 2022. In comparison, July 2022 inflows of $634 million, albeit small, comes as a whiff of fresh air.

July 2022 was again an IPO drought. FPIs sold $0.930 billion in first half and bought equities worth $1.564 billion in the second half of June 2022. Here is the AUC standing, sector-wise.

Industry Group	Assets Under Custody (AUC) of FPIs - $ Billion (July 2022)
Financials	181.64
Oil & Gas	67.65
IT Services	65.88
FMCG	38.25
Automobiles	31.09
Power	28.17
Healthcare and Pharma	26.26
Consumer Durables	21.12
Metals & Mining	16.88
Telecom	13.58
Capital Goods	13.22
Consumer Services	12.98
Chemicals	12.49
Top 13 Sectors	529.21
Other 10 sectors	40.22
Total FPI AUC	569.43

Data Source: NSDL

Quick look at the AUC mix in July 2022

The table above captures the top 13 sectors with AUC more than $10 billion. NSDL has modulated the list from 40 sectors to 23 sectors. Out of these 23 sectors that FPIs invest in, AUC of the top-13 sectors accounted for 92.94% of total FPI AUC of $569.43 billion. The July 2022 AUC at $569.43 billion is up +8.8% over the June 2022 AUC. However, since the peak of October 2021, the FPI AUC is down -14.6%.

How does the sector mix of AUC stack up? Financials, comprising banks, NBFCs and insurance accounted for 31.9% of overall FPI AUC, which corresponds to the approximate Nifty weight too. The other significant AUC contributors were Oil & Gas $67.65 billion, Information Technology $65.88 billion, FMCG $38.25 billion, Automobiles $31.09 billion, Power $28.17 billion, Healthcare $26.26 billion and Consumer durables $21.12 billion. AUC gains were across the board with FMCG gaining the most in percentage terms. However, it must be remembered that this AUC spike in July 2022 is largely on account of the spike in the stock market indices and a sharp rally across stocks.

Finally, there was some good news in July 2022. The trend of FPI selling which started in October 2021 got nixed (hopefully) after nine persistent months of selling; when FPIs took out $35 billion from Indian markets. Despite this bounce in July, FPI holdings in Indian stocks are still $98 billion below the peak AUC that FPIs touched in October 2021.

FPIs and the sectoral buying story of July 2022

Data Source: NSDL

FPIs bought $634 million in Indian equities in July 2022. It must be noted that FPIs were net sellers in the first half of July with the sentiments turning around only in the second half. Out of the 23 sectors where FPI flows are tracked by NSDL, FPIs were net sellers in 7 sectors in June 2022,neutral on 3 sectors and buyers in the rest of the sectors. Like in June 2022, the IPO market was quiescent even in July 2022 with not a single IPO hitting the market. Clearly, the post-listing experience of LIC has left the IPO issuers with a lot to chew over.

The buying was strongest in telecom at $576 million and FMCG at $537 million. Telecom did attract a lot of buying interest ahead of the 5G auctions while FMCG companies had hinted at solid top line growth despite pressure on operating margins. Rural sales also surprised positively in the quarter. On the positive side, capital goods saw buying of $241 million and power sector of $204 million. While power buying was more a renewable bet, capital goods may be the first signs of the capital cycle turning around. There were smaller chunks of buying in financials, construction, cement and the automobile sectors too.

Selling by FPIs was much narrower in July 2022

For a change, the selling was a lot more muted in July 2022, although there were sectors that saw net selling by the FPIs. The oil and gas sector saw net selling of $661 million. This was actually concentrated in a short span of a few days after the windfall tax was introduced on exports of petrol and diesel as well as oil extracted in India. This led to aggressive selling in stocks like Reliance and ONGC, where the upstream pressure was the most. Another sector that saw aggressive selling was IT at $585 million. This was in the immediate aftermath of the results announcement. Most IT stocks saw aggressive selling as the quarterly numbers showed weak guidance and attrition pressure on operating margins.

Apart from IT and hydrocarbons; the other 2 sectors that saw selling to a lesser extent were metals and chemicals. This was more on concerns over a forced slowdown in China as it targeted a zero COVID policy, leading to a spate of business shutdowns in key cities.

FPI flows into IPOs and secondary markets in calendar 2022

Calendar Year 2021	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

Data Source: NSDL (all figures in $ million)

If you look at the cumulative FPI flows for calendar 2022 till July, the net outflows of $27.82 billion is still intimidating. However, the positive takeaway is that July 2022 has been the first positive month for FPI flows into equities after 9 months of selling. The positive takeaway is that August has also begun on a positive note and we may get a positive picture once the IPOs get back to regular stream.

One factor that could drive positive flows by FPIs is the rupee bottoming around Rs80/$. That could incentivize FPI flows in terms of dollar adjusted returns. For that, the focus of the FPIs would be rivetted on the current account deficit.