FPIs jettison some sectors twice as fast the overall rate of outflows

Some got incremental inflows even amid the exodus, reveals fortnightly depository data

Foreign portfolio investors (FPIs) have dumped some sectors twice as fast the overall rate of outflows.

The FPI exits since May were around 0.6 per cent of their total equity assets under custody, reveals a fortnightly depository data.

Their selling has been twice as severe or more in sectors including consumer durables (1.6 per cent), metals and mining (1.7 per cent), telecommunications (2.2 per cent), and construction material (2.4 per cent).

The data on FPI investments are available on a daily aggregate basis. The analysis considered additional data on sectoral flows available on a fortnightly basis.

The latest data is as of June 15. It shows FPIs had net-sold the equivalent of Rs 24,949 crore as of June 15. This was the equivalent of 0.6 per cent of the end-May assets under custody.

Individual sectoral sales were calculated as a percentage of FPI holdings as of end-May. The power sector was the fifth on the list of top exits as a percentage of overall holdings. They sold the equivalent of 1 per cent of their holdings in the first two weeks of June.
 

The overall FPI exit figure has since swollen to Rs 41,218 crore as of June 22.

Foreign investors sold Rs 8,050 crore worth of stocks in financial services. This is the largest sector in terms of absolute outflows. It is followed by information technology, or IT (Rs 3,702 crore). But exits are not as significant if considered as a percentage of their overall holdings.

For IT stocks, it is the equivalent of 0.7 per cent of total FPI assets in the sector. The financial services sector outflows are roughly the same (0.6 per cent) as overall outflows. Some sectors have also seen inflows, although as a relatively smaller proportion of existing assets. These include services (0.3 per cent), oil, gas, and consumable fuels (0.2 per cent), chemicals (0.1 per cent), and textiles (0.1 per cent).

The capital goods sector saw inflows of Rs 770 crore, or the equivalent of 0.8 per cent as of end-May FPI assets in the sector, making it the biggest sectoral beneficiary of relative inflows.

There have been signs of increasing capital goods expenditure.

“Going by the early results of our surveys, capacity utilisation in the manufacturing sector increased further to 74.5 per cent in the fourth quarter of 2021-22 (FY22), from 72.4 per cent in the third quarter of FY22. Capacity utilisation is also likely to increase further in 2022-23,” said Reserve Bank of India Governor Shaktikanta Das.

“Investment activity is thus expected to strengthen, driven by rising capacity utilisation, government’s capital expenditure push, and deleveraged corporate balance sheets. Improvement in investment activity is also reflected in demand pick-up for bank credit and persisting growth in imports of capital goods,” he added.

Foreign outflows are likely to continue, according to a June 22 equity strategy report from global financial services major Bank of America Corporation. It noted that 26 of the 34 global central banks are in tightening mode and suggested shifting to defensive sectors, including staples, health care, and utilities.

“Tightening liquidity is a negative for equity markets,” said the report, authored by a team of research analysts, including Amish Shah, Ankur Deore, and Udit Dhekale.

The S&P BSE Sensex was down 1.35 per cent to close at 51,822.53 on Wednesday. Foreign investors were net-sellers by Rs 2,920.61 crore, revealed the provisional exchange reports.