FPI turn net buyers of $1.83 Billion in Indian equities in Dec-24

6 Jan 2025 , 10:11 AM

FPIS NET SELL $2.56 BILLION IN NOVEMBER 2024

After net selling equities to the tune of $11.21 Billion in October and $2.46 Billion in November, the FPIs turned net buyers in equities in December. However, the net buying figure of $1,825 Million for December 2024 may be tad misleading. If you break up the month into two halves, then FPIs were net buyers in the first half of December to the tune of $2,682 Million but net sellers in the second half of the month at $857 Million. Bulk of the FPI inflows were accounted for by IPO inflows as India closed the year 2024 with record IPO collections to the tune of ₹1.83 Trillion.

The data flows were rather mixed in December. The inflation showed signs of coming under controlling, while IIP and core sector bounced for three months in a row. It has largely exorcized the ghosts of growth contraction in August. Also, the current account deficit stayed at 1.2% of GDP in Q2FY25, although experts anticipate this could worsen in Q3 and Q4. The real concern was over the faltering capex, which is nearly 12% lower than the previous year, clearly showing that the priorities of the government had changed.

Let us also look at the macro picture of flows across equity and debt for calendar year 2024. For year 2024, FPIs were net sellers in secondary market equities worth ₹1,21,210 Crore, but infused ₹1,21,637 Crore into IPOs; making them net buyers in equities of ₹427 Crore. However, debt saw net inflows of ₹1,65,343 Crore in 2024; resulting in overall  infusion in 2024 by FPIs of ₹1,65,770 Crore.

FPI AUC ENDS LOWER IN DECEMBER 2024

Assets under custody (AUC) is a function of FPI flows and price accretion or depletion (as the case may be). Between November 2024 and December 2024, FPI AUC fell from $851 Billion to $831 Billion. The details are captured sector-wise.

Industry Group	FPI AUC (Dec 2024) ($ Billion)	FPI AUC (Nov 2024) ($ Billion)
Financials (BFSI)	239.39	246.22
Information Technology (IT) Services	85.16	84.50
Healthcare and Pharmaceuticals	59.30	57.04
Automobiles and Auto Components	58.99	61.72
Oil & Gas	54.89	59.72
Fast Moving Consumer Goods (FMCG)	47.77	49.94
Capital Goods	45.12	46.65
Consumer Services	40.26	39.32
Telecommunications	31.85	33.05
Power (generation and transmission)	30.62	33.62
Consumer Durables	25.55	25.54
Metals and Mining	22.78	23.87
Realty	19.86	18.80
Services	16.69	16.42
Construction	16.35	16.67
Cement	13.74	13.99
Chemicals	13.11	13.84
Top 17 Sectors	821.41	840.80
Other 6 sectors	10.08	9.88
Total FPI AUC	831.49	850.68

Data Source: NSDL

The table above captures the top 17 sectors where the FPI AUC is more than $10 Billion as of the close of December 2024. Out of the 23 sectors as identified by NSDL, the AUC of the top-17 sectors accounted for 98.79% of total FPI AUC of $831.49 Billion. It may be recollected that in September 2024, overall FPI AUC (including equity, debt, and hybrids) had crossed the $1 Trillion mark for the first time. Now it is 17% below that mark!

What about the components of AUC as of December 2024. At $239.39 Billion, BFSI dominates the AUC stakes; while Healthcare has scaled up sharply to third position. The other key sectors by AUC were IT, Automobiles, Oil & Gas, FMCG, and Capital Goods. In terms of MOM change in AUC in December 2024, there was value accretion in IT, healthcare, consumer services, and realty; while there was value depletion in BFSI, automobiles, oil & gas, FMCG, and Power.

FPIS NET SELL IN SECOND HALF, AFTER BUYING IN H1-DECEMBER

In December 2024, FPIs were net buyers of $1.83 Billion in Indian equities; a visible turnaround from the persistent selling in October and November. However, after some heavy buying in the first half of December 2024, the second half saw selling. If you sum up the positive flow sectors, they added up to $4.33 Billion, while the negative flow sectors added up to $2.50 Billion. Let us start with the net inflow sectors in December2024.

FPI Net Buying in Sectors	H1-Dec-24 ($ Million)	H2-Dec-24 ($ Million)	Dec-24 ($ Million)
Information Technology (IT)	+796	+268	+1,064
Realty	+552	+10	+562
Healthcare	+226	+216	+442
Others	+350	+58	+408
Consumer Services	+320	+59	+379
Capital Goods	+313	+55	+368
Financial Services (BFSI)	+875	-507	+368
Services	+65	+141	+206

Data Source: NSDL

While IT saw a good deal of defensive buying through the month as a hedge against the weakening rupee, the financial services companies saw net buying in the first half, although FPIs were net sellers in the second half. Realty and healthcare attracted a lot of positive flows, while the others category largely refers to the IPO flows from FPIs. The general trend across the key positive flow stories, were consistent buying in both halves of Dec-24.

FPIS NET SELLERS IN OIL, AUTOS, AND FMCG

Here is a sectoral break-up of FPI net outflows from Indian equities in December 2024.

FPI Net Selling in Sectors	H1-Dec-24 ($ Million)	H2-Dec-24 ($ Million)	Dec-24 ($ Million)
Oil & Gas	-629	-641	-1,270
Automobiles	-215	-298	-513
Fast Moving Consumer Goods (FMCG)	-195	-132	-327
Power	-65	-153	-218
Consumer Durables	-88	-18	-106

Data Source: NSDL

FPI selling was relatively subdued in December 2024. Once again, bulk of the selling was visible in the oil & gas sector and the automobiles sector. However, many of these sectors like automobiles and FMCG had some good tidings late in the month. There were signs of pick-up in rural demand and auto sales numbers were sharply higher in December, amidst the festive season. Also, the likelihood of middle class tax breaks in the upcoming Union Budget has also changed the narrative for consumer goods.

OUTLOOK FOR FPI FLOWS IN COMING MONTHS

FPIs have been ambivalent about Indian markets since August 2024; which is not surprising. There are several reasons. Firstly, the RBI has held status quo on rates even as the Fed has already cut rates by 100 basis points. Secondly, in its enthusiasm about fiscal prudence, the government has ended up constraining capex growth, which is having an impact on the GDP growth in the last two quarters. However, there could be a new narrative in the upcoming Union Budget, and that could entirely change the FPI perception.

The good news is that the current account deficit at 1.2% in Q2FY25 was in control. However, this is expected to worsen in the coming quarters. This week, the FPIs will be closely watching the first advance estimate of FY25 GDP to be put out by MOSPI. The other big imponderables are the persistent selling by FPIs and the secular weakness in the rupee. For FPIs, it looks like the start of another uncertain and challenging investment year in India.