11 mins read . 21 Aug 2023
The first signs of a slowdown in FPI flows were already there in the last 2 weeks. In the first 2 weeks of August 2023, the FPI flows into India have suddenly turned tepid. For instance, the total FPI flows into India in the first half of August is just Rs737.16 crore, with half of that coming from the secondary markets and the balance from the primary markets. This is in contrast to the over $5 billion of FPI flows that came in each month in May, June, and July 2023. However, debt inflows were a lot more robust in August, although, that is hardly sufficient to compensate for the tepid equity flows in the month.
FPI Flows Secondary
FPI Flows Primary
FPI Flows Equity
FPI Flows Debt/Hybrid
Overall FPI Flows
Total for 2023
# - August Data is up to 14th August
Data Source: NSDL (all figures are Rupees in crore). Negative figures in brackets
There is a positive to the table above. Since March 2023, the FPIs have been net buyers in equities in each of the last 5 months and half month of August. The net result is that the massive FPI selling that we saw in the calendar year 2022 has been fully offset in the first 8 months of 2023. However, FPIs started selling in India since October 2021, so there is 3 more months of selling that has to be offset and it remains to be seen if that can be achieved in terms of FPI flows in the remaining months of calendar year 2023. For now, let us move to the more immediate issue of what is hampering FPI flows in August after they infused a combined $17 billion into India between May and July 2023?
There were several reason for the overall FPI flows into India slowing in August 2023. Here are some of the key reasons for the same.
The good news is that the short term may be a little difficult, but the long term still looks promising. Here is what we take away from the long term story of FPI flows into India.
While the short term concerns cannot be wished away, the long term still looks promising for FPI flows into India. Here is why.
While Fitch and Moody’s downgrades will be concerns, there is enough steam in India consumption and India infrastructure to sustain FPI flows in the future.
Here are some of the key points that will drive FPI flows into India in the coming months. Firstly, the CME Fedwatch will be closely tracked. Fed still remains hawkish and till that time, the FPIs are likely to be cautious on India flows. Secondly, the rating downgrade by Fitch and Moody’s will continue to be an overhang, especially for risk-off flows. That remains a concern since India is at the lowest level of Investment Grade. Thirdly, the results season has seen decent profit growth but pressure on top line. The global slowdown in demand is clearly showing and that will be a key factor. Lastly, global oil prices and Indian rupee will be the key macros. The spike in Brent has made the rupee vulnerable and that is likely to impact FPI dollar returns. The outlook is positive, but immediate concerns remain!