Foreign portfolio investors (FPIs) have been net buyers in the Indian equity market in April, the second consecutive month in 2023 after selling equities earlier in the year due to the Adani-Hindenburg debacle.
FPIs started buying Indian equities in November 2022, as they turned optimistic with falling inflation and slowing rate hikes. We take a look at the sectors that have attracted them to the market over the past twelve months.
In April 2022, the market saw a sell-off of Rs 17,141 crore from FPIs, on the back of rising interest rates and inflation. The financial services and IT sectors had the highest outflows of Rs 12,891 crore and Rs 8,579 crore respectively. However, FPIs invested Rs 5,231 and Rs 1,756 crore in the healthcare and FMCG sectors respectively, indicating that they shifted towards a defensive play due to fears of an economic downturn.
June 2022 saw a massive selling spree that resulted in Rs 50,203 crore being wiped out from the market. All major sectors witnessed an outflow with the financial services and IT sectors experiencing the largest outflows.
However, FPIs became net buyers of equities in August 2022, as companies posted strong results for the June quarter. The month saw a net inflow of Rs 51,206 crore, with investments in all sectors. Financial services and healthcare had the largest investments of Rs 12,799 crore and Rs 8,509 crore, respectively, in August.
However, there were two more months of outflows from FPIs in September and October. This trend reversed in November, as FPIs became net buyers with an inflow of Rs 36,240 crore in equities. Financial services had the highest investment of Rs 14,205 crore that month, while sectors like FMCG, IT, automobile & auto components and consumer services saw a healthy inflow.
FPIs made these investments with the hope that rate hikes would slow down due to falling inflation. This sentiment continued in December 2022, with FPIs net buyers of Rs 11,120 crore in equities.
In contrast FPIs sold equities worth Rs 28,851 crore in January 2023, with Indian markets losing ground to China as lockdown restrictions there were lifted. The second half of January was marred by the explosive Adani-Hindenburg saga, which further discouraged foreign investors. Financial services and oil, gas & consumable fuels sectors saw the highest outflows of Rs 15,204 crore and Rs 7,596 crore respectively during the month.
In the past year, FPIs have made a net investment of Rs 11,629 crore in the market as inflation and rate hikes have eased up. Most of the major sectors had a net inflow during the month, with financial services attracting the highest investment and IT experiencing the highest outflow.
