10 mins read . 07 Sep 2023
To an extent, you can call August 2023 a minor disappointment for FII flows. Between May and July 2023, the FPIs infused $5.5 billion on an average each month. In comparison, the FPI flows into Indian equities were just about $1.48 billion in August 2023. In absolute terms, August is not a bad month for FPI flows, but it is surely lower compared to the average flows between May and July Take at the 2023 monthly FPI flow table below.
Calendar Month | FPI Flows Equity | FPI Flows Debt/Hybrid | Overall FPI Flows |
Calendar 2022 | (121,439.44) | (11,375.78) | (132,815.22) |
Jan-2023 | (28,852.02) | 2,308.27 | (26,543.75) |
Feb-2023 | (5,294.31) | 1,155.19 | (4,139.12) |
Mar-2023 | 7,935.63 | -2,036.42 | 5,899.21 |
Apr-2023 | 11,630.82 | 1,913.97 | 13,544.79 |
May-2023 | 43,838.11 | 4,491.44 | 48,329.55 |
Jun-2023 | 47,148.34 | 9,109.36 | 56,257.70 |
Jul-2023 | 46,617.76 | 1,359.32 | 47,977.08 |
Aug-2023 | 12,262.28 | 6,075.54 | 18,337.82 |
Sep-2023 # | 660.92 | 855.00 | 1,515.92 |
Total for 2023 | 1,35,947.43 | 25,231.77 | 1,61,179.20 |
Data Source: NSDL (all figures are Rupees in crore). Negative figures in brackets
What do we read from the FPI flows table above. Let us leave out September since it just considers 5 days of data, but there are two things that stand out about August. Equity flows may have been tepid, but debt flows have been robust. Also, the inflows by FPIs in the first 8 months of calendar 2023 has more than offset the negative flows of calendar 2022. The million dollar question which sectors did the FPIs buy into and which sectors did they sell into? Let us look at the FPI buying in August 2023 first.
The capex cycle buying is understandable, but the IT buying may sound rather intriguing, but we will come to that later. Here are the sectors that commanded bulk of the FPI inflows in the month of August 2023.
Where FPI money flowed in | |
Sector | Amount ($ million) |
Power Sector | +1,398 |
Capital Goods | +1,007 |
Information Technology (IT) | +495 |
Consumer Services | +246 |
Healthcare | +173 |
Data Source: NSDL
In a month when the net inflows from FPIs into Indian equities were just about $1.48 billion, two sectors attracted more than $1 billion in FPI buying. Let us look at the highlights of the FPI inflows into sectors in August 2023.
The moral of the story is that FPIs in August 2023 have made two big bets. Firstly, they are betting on the theme of capital investment cycle revival and second on dollar revenue companies that can act as a hedge against rupee weakening. Let us move to FPI selling.
The selling was quite high on 3 major sectors viz. metals, BFSI and FMCG. BFSI was the sector that attracted $6 billion out of the $17 billion of FPI inflows that came into India between May and July. However, the tables appear to have changed in August as you can see in the table below.
Where FPI money flowed out | |
Sector | Amount ($ million) |
Metals & Mining | -840 |
Financials (BFSI) | -784 |
FMCG | -315 |
Oil & Gas | -269 |
Telecom | -123 |
Data Source: NSDL
Between Metals, BFSI and FMCG, the FPIs sold off nearly $2 billion of equities in August. Here were the major triggers for the selling in August.
To sum up the sell side story by FPIs, it is about macro risks at the level of China, risk-off selling and crude oil prices.
Even as the Nifty and Sensex are close to peak levels, the assets under custody (AUC) of FPIs in India is still below the peak of October 2021. However, the gap is not much. Against the peak FPI AUC of $667 billion, the FPI AUC stands at $644 billion today. Which are the sectors that built up FPI AUC in August 2023? Clearly, it was IT, capital goods and power. No prizes for guessing really. Which sectors lost on AUC in August? It was BFSI, oil & gas, FMCG and august that saw the bulk of the AUC depletion. August leaves the FPI story at a very delicate point. September could be more interesting!
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