What FIIs bought and sold in India in May 2023?

6 Jun 2023 , 11:41 AM

After  net FPI selling in January and February 2023, the month of March saw net inflows. However, that was on account of the GQG block investment in Adani stocks. If that was excluded, FPIs were net sellers in March too. April 2023 saw the first decisive month of FPI buying at $1.42 billion but it was May 2023 that built on the momentum with net FPI buying of $5.30 billion. FPIs infused $3 billion in the first half and $1.3 billion in the second half of May 2023.

That makes May 2023 the best month for FPI equity flows since August 2022, when FPIs last infused over $6 billion into Indian equities. However, we must not miss the bigger picture here. Between October 2021 and June 2022, the FPIs took out $34 billion from Indian equities. This was followed by $12 billion of infusion in the second half of calendar 2022. Thanks to the heavy buying by FPIs in May 2023, the overall FPI flows for calendar 2023 have turned positive. But first let us look at how assets under custody (AUC) moved.

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

Assets under custody (AUC) is the closing market value of all the equities held by FPIs. The AUC value depends partially on FPI flows and partially on stock market performance. Even FPI AUC must be seen in a slightly longer time frame. The AUC of FPIs had peaked at $667 billion in October 2021. From that point, the AUC of FPIs fell to a low of $523 billion by June 2022. As of the close of May 2023, the FPI AUC stands at $590 billion. Certainly, that is not as bad as June 2022, but nowhere as good as October 2021!

Industry  Group	FPI AUC (May 2023) ($ billion)	FPI AUC (Apr 2023) ($ billion)
Financials (BFSI)	199.12	195.12
Information Technology (IT) Services	59.01	56.52
Oil & Gas	57.63	57.50
Fast Moving Consumer Goods (FMCG)	44.78	42.06
Automobiles and Auto Components	37.09	33.57
Healthcare and Pharmaceuticals	29.68	28.42
Consumer Durables	20.14	18.74
Capital Goods	19.39	17.73
Power (generation and transmission)	18.39	19.19
Metals and Mining	18.17	17.47
Telecommunications	15.42	14.58
Consumer Services	14.59	13.52
Chemicals	12.23	12.28
Cement	10.66	10.21
Services	10.59	10.04
Construction	10.20	10.96
Top 16 Sectors	577.09	557.89
Other 7 sectors	13.11	13.23
Total FPI AUC	590.20	571.12

Data Source: NSDL

The table above captures the top 16 sectors with AUC above $10 billion as of May 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-16 sectors accounted for 97.78% of total FPI AUC of $590.20 billion. The May 2023 AUC at $590.20 billion is up 3.34% compared to April 2023, which is not surprising considering the relentless flow of FPI buying in equities during the month. The interesting sidelight of the month was that FPI AUC of the IT sector once again bounced back to second place, above oil & gas, purely on the back of a dead cat bounce in IT stocks.

The BFSI space, comprising of banks, NBFCs and insurance accounted for 33.74% of overall FPI AUC. In absolute terms, there has been accretion in AUC across sectors, except for the oil & gas sector which was flat and the power sector that saw selling by FPIs in the month of May 2023. BFSI sector managed to improve its overall AUC tantalizingly close to the $200 billion mark. Among solid gainers in AUC for the month of May 2023 were BFSI, FMCG, IT, Automobiles, consumer durables and capital goods. The hydrocarbon space saw flat AUC, due to pressure from Reliance, while power sector saw depletion in AUC in May 2023.

Apart from BFSI, the other significant AUC contributors were IT $59.01 billion, oil & gas $57.63 billion, FMCG $44.78 billion, Automobiles $37.09 billion, Healthcare $29.68 billion, and consumer durables $20.14 billion. Ironically, FPIs continued to be net sellers in IT.

Financials and Autos see buying, IT marginally sells off in May 2023

Here is a sectoral break-up of the FPI flows into Indian equities in the month of May.

Where FPI money flowed in	Where FPI money flowed out
Sector	Amount ($ million)	Sector	Amount ($ million)
Financials (BFSI)	+2,142	Information Technology	-108
Automobiles	+1,056	Media & Entertainment	-87
FMCG	+392	Power	-80
Consumer Services	+348	Metals & Mining	-75
Healthcare	+348	Construction	-42
Oil & Gas	+332
Capital Goods	+304
Cement	+164

Data Source: NSDL

Let us first focus on sectors getting positive flows from FPIs in May 2023. Once again, it was the Financial Services, comprising of banks, NBFCs and insurance, that led the way with $2,142 million of inflows. This was followed by automobile sector inflows at $1,056 million. Other sectors to see consistent inflows were FMCG at $392 million, Consumer Services $348 million, Healthcare $348 million, oil & gas $332 million and Capital Goods $304 million.

The sectors that saw FPI selling in May were IT, media power and metals. However, in a month when FPI net inflows were to the tune of $5.30 billion, it is obvious that the bias would be in favour of the inflows into equities. The surge in FPI flows could be attributed broadly to the improved macros, better than expected GDP growth, lower inflation, and sharp improvement in operating performance of Indian companies in Q4FY23.

Key triggers for sectoral FPI churn in May 2023

Buying in financial services was an obvious corollary to the RBI decision to hold repo rates at 6.5% in the April MPC meet. Now there are expectations that this would be repeated in the June meet also. Broadly, the global and domestic cues are very favourable for sustained spreads of Indian banks. Among the other sectors that attracted FPI inflows; automobiles and ancillaries saw buying on the back of sustained order flows, overflowing order book positions and sharp reduction in operating and manufacturing costs. 

FMCG stocks also attracted FPI flows in the month of May 2023 after better than expected results from major FMCG players. The FMCG companies not only gained from higher rural sales but also from lower costs of oil related inputs and agricultural inputs. Among other positive flow items, some of the consumer related digital plays also attracted a lot of FPI buying in the month. IT continued to see net selling at an overall level, albeit marginal. The selling in media sector was largely driven by the sell-off in Zee Entertainment by FPIs.

A glance at overall FPI flows break-up in May 2023

Here is how the FPI flows in May 2023 and on a cumulative basis looked like.

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 #	6,149.55	339.92	6,489.47	-672.10	5,817.37
Total for 2023 #	26,518.30	9,229.40	35,747.70	7,160.35	42,908.05
# - June Data is up to 02nd June only

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

Finally, what are the big stories for FPI flows in June 2023? A lot will predicate on the IPO time table and the FPI flows into IPOs. Mainboard IPOs have still been quite tepid in fiscal FY24. On the positive side, the Fed is likely to pause in June and the RBI is also expected to hold rates in June. More than the action, it is the language that will hold the key to FPI flows. While quarterly results have been robust in Q4FY23, a lot will still depend on how quickly consumer inflation comes down in India. FPIs will have a much wider choice across emerging markets as valuations in many other EMs are also quite compelling. June 2023 will be a month, when Indian equities will have to really compete for FPI inflows.