Foreign Portfolio Investors ( FPIs) have been dumping Indian stocks steadily since September, and their holding is down to the lowest level in ten years at 16.6 per cent.
They have been selling finance stocks and switching to industrials among other sectors. However, the buying in the rest of the market has not made up for the selling in financial stocks yet.
Aggregate holdings of FPIs stand at Rs 54.5 trillion, implying 16.6% holdings of overall Indian equities as of November 23, which is the lowest since 2012.
FPI outflows intensified post Sep’23 as US 10-year bond yields break above range seen over the past year although it has begun to cool off.
FPI holding of Indian equities hits decadal low even as fundamentals approach historical best
FPI and mutual fund October 2023 sectoral trends
“The decisive breakout of US bond yield above 3.5-4% post-September 2023 spooked capital markets once again after 2021-22, even as the US Fed approached the end of its jumbo rate hike cycle driven by a moderating inflation outlook. The resulting FPI selling since Sep’23 further exacerbated by their portfolio orientation has led to FPI holdings of Indian stocks reaching their lowest level in a decade at 16.6%,” said Vinod Karki of ICICI Securities.
However, these decadal-low FPI equity holdings are ironic given that Indian fundamentals are approaching their historical best, added Karki.
Point to note: Despite FPI holdings hitting a ten-year low, SIP inflows continue to rise structurally in spite of extreme volatility and have reached north of $ 2billion per month.
Active ‘market cap’ based MF portfolios continue to see buying across sectors led by healthcare, private banks plus other financial services, industrials etc. while selling was observed in PSU banks during Oct’23.