Foreign Institutional Investors (FII) seem to have fallen out of love with Indian stock markets as outflows continued in April and are now heading towards the eighth month in May. Bank of America Securities (BofA) in a report noted that outflows so far this year by FIIs stand at $20 billion. In the cross-hairs have been sectors such as Information Technology, Real Estate, and Financials, among others. The magnitude of the outflows has been cushioned by Domestic Institutional Investors (DII) who have poured in roughly $19 billion during the same period, however, the inflows seem to be slowing down now.
FII selling continues unabated
In April FIIs pulled out $2.2 billion which was a 58% drop from the previous month but remained negative for the seventh consecutive month. Now in May, so far, FIIs have pulled out roughly $3.3 billion, making it the eighth straight month. “Active funds (-US$2.2bn) continued to drive outflows while passive funds (US$34mn) turned marginally positive after highest outflows witnessed in last month,” BofA report said.
The heavy outflows witnessed by Indian stock markets were second only to Taiwan. On the other hand, Brazil led inflows with $11 billion coming in. Emerging market funds have steadily increased their allocation in favor of India now at 19.6% against 13.5% in January 2021, as the country benefited from allocations cuts towards China.
What sectors are FIIs giving up on?
BofA report showed that outflows by FIIs have increased for the Information Technology sector at $1.1 billion. The Real Estate sector has seen outflows of $245 million, the Energy sector has seen $35 million in outflows. The selling continues for Financials, Industrials, and Materials albeit it has slowed down. In April Financials saw outflows worth $1.7 billion, while Industrial outflows were at $245 million. The materials sector saw FII outflows to the tune of $3 million.
Meanwhile, Healthcare saw $684 million in inflows, the highest since January 2021, consumer discretionary inflows were at $241 million, and consumer staples flows were positive $230 million. “Till April 2022, within NSE universe, FIIs turned OW on utilities (+55bps) and increased OW position in financials (+8bps), while OW position reduced in energy (-26bps) and IT (-102bps),” BofA said. Domestic fund flows were $4.4 billion in April.