8 mins read . 06 Jul 2023
For a full 9 months between October 2021 and June 2022, the foreign portfolio investors (FPIs) were net sellers. They took out close to $34 billion from Indian equity markets during this 9-month phase. Year 2023 began on a dull note with FPIs selling in January and February. GQG Partners led to positive flows from March onwards. However, the months of May and June 2023 have seen massive FPI flows into Indian equities. May 2023 saw FPI inflows of $5.30 billion and June 2023 witnessed FPI inflows of $5.74 billion. In short, $11 billion of FPI flows came into Indian equities in 2 months. It was not just in equities, but FPIs were net buyers in debt also. They infused close to $2 billion into Indian debt. As of the end of June 2023, FPIs have been net buyers in India to the tune of $11 billion in debt and equity, after offsetting the selling in January and February.
The table captures monthly FPI flows into equity and debt for 2022 and 2023, with the latter being month-wise.
FPI Flows Secondary
FPI Flows Primary
FPI Flows Equity
FPI Flows Debt/Hybrid
Overall FPI Flows
|Total for 2023 #|
# - June Data is for full month
Data Source: NSDL (all figures are Rupees in crore). Negative figures in brackets
The year 2023 began on a dull note with FPIs net sellers of Rs28,852 crore in equities. The selling continued in February but March saw a turnaround. However, the March flow was largely accounted for by the $2 billion infusion by GQG Partners into the Adani group. If that was removed, FPIs would have been net sellers in March also. Things actually turned to genuine positive flows in April, but May and June have broken recent records with $11 billion inflows into equity in just 2 months and around $13 billion overall in these 2 months (including debt). Clearly, the year 2023 appears to be different; but what has triggered the inflow.
Here are some of the major triggers explaining this surge in FPI interest in India.
Apart from these factors, the stable rupee also helped. The rupee was partially helped by flows and partially by RBI intervention. The bottom line is that, the stable rupee has helped FPIs to protect their gains.
While the positives have been adequately discussed, there are also risks to FPI flows. FPIs allocate across emerging markets and they are quite agnostic about such decisions. Therefore, one factor that will play on the minds of FPIs is global hawkishness. Central banks, today, are more than willing to use rate hikes to fight inflation as that looks like the lesser monetary evil. Hence, the recession possibility cannot be ruled out. In India, monsoons have been delayed and while sowing is catching up, the impact on paddy acreage is likely to be palpable. That has implications for food grain production and for food inflation. Weak agricultural output also has an impact on rural demand and impacts sectors like FMCG, two-wheelers, tractors, and consumer goods.
IT will be the one sector that the FPIs would be closely watching out for. This sector has been lying low for some time and domestic funds are betting big on this sector. However, FPIs are still sceptical. They are assessing the impact of global spending on Indian IT companies. In FY23, it was services exports that made up for the merchandise deficit and it was led by the IT sector. However, FPIs are still cautious about IT demand and pricing. This one sector could hold the key to FPI flows in 2023.