What were the sectoral preferences of FPIs in November 2022?

FPIs sectoral preferences in November 2022
FPIs sectoral preferences in November 2022

Global Market
by 5paisa Research Team Last Updated: 2022-12-09T09:40:46+05:30

On 05th December, NSDL put out the detailed flows of FPIs into Indian equities for the month of November 2022. There were not too many surprises. In a month, when FPIs infused $4.45 billion of net flows into equities, it was the banking and financial space that attracted the maximum attention. However, the other heavyweight sectors like IT, oil & gas and FMCG also attracted good deal of buying flows in the month of November. The $4.45 billion of fresh FPI flows into equities in November 2022 is the best since the $6.44 billion of inflows in August 2022. Secondary market inflows accounted for 90% of the net equity flows from FPIs in November 2022 while the IPOs accounted for the balance 10%.

How sectoral flows looked in November 2022

The table below captures the gist of FPI flows into Indian equities in November 2022.

Sectors

First Half (Nov-22)

Second Half (Nov-22)

Total Flows (Nov-22)

Financial Services

1,406

337

1,743

Fast Moving Consumer Goods

431

54

485

Information Technology

369

105

474

Automobile and Auto Components

276

98

374

Consumer Services

206

142

348

Oil, Gas & Consumable Fuels

217

124

341

Capital Goods

201

135

336

Metals & Mining

199

98

297

Healthcare

88

66

154

Construction

67

75

142

Construction Materials

76

57

133

Chemicals

83

9

92

Utilities

0

21

21

Forest Materials

4

9

13

Others

3

0

3

Diversified

0

2

2

Sovereign

0

0

0

Services

25

-37

-12

Realty

-8

-13

-21

Media, Entertainment & Publication

2

-27

-25

Textiles

-15

-14

-29

Telecommunication

-12

-121

-133

Power

-20

-115

-135

Consumer Durables

-54

-103

-157

Grand Total

3,548

901

4,449

Data Source: NSDL (all figures in $ million)

What are the macro takeaways from the FPI flow numbers? FPIs infused $3.55 billion in the first half of November and $900 million in the second half of the month. It may be recollected that FPIs had withdrawn $34 billion from Indian equities between October 2021 and June 2022. Out of 23 sectors where FPI flows are tracked by NSDL, these FPIs were net sellers in just about 6 sectors and net buyers in 17 sectors. Here is sectoral snapshot.

  1. In banking and financials, FPIs infused $1.74 billion in November 2022, largely led by a turnaround in the performance of PSU banks during the September 2022 quarter. Banks saw overall improvement in NII and also in NIMs.
     

  2. FPIs infused $485 million into FMCG and $474 million into Information Technology stocks in November 2022. While FMCG was more of defensive buying, the IT sector buying was more of a catch up for the last few months of persistent selling by FPIs.
     

  3. In addition, FPIs infused $374 million into automobiles and over $300 million into other sectors like consumer services, oil & gas, capital goods and metal stocks. Even healthcare saw positive FPI flows in November 2022.

Were there any sectors where FPIs sold off? Actually, in November 2022, the FPIs did sell off in 3 specific sectors. They sold $157 million in consumer durables sector as FPIs are worried of stocks linked to consumer spending, especially rural spending. FPIs also sold out of Power to the tune of $135 million and Telecom to the tune of $133 million. In both cases, it was more a case of being cautious after the sharp rally in stocks like NTPC, Tata Power and Bharti Airtel.

Assets under custody of FPIs back above $600 billion

Assets under custody (AUC) depends on the FPI flows and also of stock market performance. With the flows erratic and markets volatile, the FPI AUC had already fallen by nearly 22% from $667 billion in October 2021 to $523 billion in June 2022. If AUC of FPIs picked up in July and August, it once again tapered in September and October. However, November 2022 saw the FPI AUC bounce back once again to $611 billion. The table below captures the sector-wise AUC as of November 2022. While the NSDL discloses AUC numbers for all the 23 sectors, we have only covered 9 key sectors with AUC above $20 billion.

Industry
Group

Assets Under Custody (AUC)
of FPIs - $ Billion (Nov 2022)

Financials

197.66

Oil & Gas

71.49

IT Services

65.53

FMCG

40.84

Automobiles

33.32

Healthcare and Pharma

29.63

Power

27.71

Consumer Durables

20.82

Metals & Mining

20.55

Total FPI AUC

611.11

Data Source: NSDL

In the last 1 year, the AUC of financials had fallen sharply, but it has regained its heft and is back to above its old levels. However, IT continues to lag, having lost substantial AUC since its peak last year. Financials at $198 billion lead the AUC pack and account for over 32% of the overall AUC. Other significant AUC figures of various sectors are Oil & Gas at $71.49 billion, Information Technology at $65.53 billion, FMCG at $40.84 billion, Automobiles at $33.32 billion and Healthcare at $29.63 billion. In November 2022, FPIs saw AUC accretion in financials, oil & gas and FMCG. Other sectors were either neutral or lost AUC.

How do FPI flows and FPI AUM promise to pan out in December 2022. Being the last month of the calendar year, December is normally a quiet month and FPIs don’t get into fresh allocations or into new risks. One thing is clear that risk-on investing is coming back and FPI trends may now be more credible in the month of January 2023. A lot will predicate on how the Fed slows its rate hike aggression and how the RBI responds. At a more fundamental level, FPIs are likely to continue to bet on the India at $5 trillion GDP story.


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