Market value of FPI holdings to investment at 3x: Motilal Oswal

The ratio of market value of foreign portfolio investor (FPI) holdings to their cumulative investments in Indian markets is 3x — down from 3.4x in 2021-22 (FY22), but up sharply from a trough level of 1.8x in 2012-13.

According to an analysis by Motilal Oswal, FPIs have made a cumulative investment of $191 billion in domestically-listed companies over the past three decades. Their value of holdings is currently at $578 billion. At the peak, the value of their holdings had climbed to $677 billion in FY22.

Between 2011-12 and FY22, the market value of FPI holdings had increased at an annualised rate of 16.5 per cent in local currency terms and a modest 11.5 per cent in US dollar terms.

Nearly 60 per cent of the $191-billion investment by FPIs came in between 2009-10 and 2014-15 (FY15). Between 2015-16 (FY16) and 2019-20, overseas flows tapered to just $11 billion.

2020-21 saw record inflows of $37.3 billion, thanks to the post-pandemic stimulus measures taken by global central banks, mainly the US Federal Reserve. However, a large portion of this flew out of India. Between FY22 and 2022-23 (FY23) to date, FPIs have yanked out $26 billion.

While FPI flows ebbed after FY15, domestic institutional investor (DII) flows have accelerated, especially from equity mutual funds.

“Over the past 23 years, beginning 1999-2000, DIIs have invested $90.6 billion in Indian equity markets… Notably, a large part of this — $86.7 billion — was recorded over the past eight years (FY16-23 year-to-date),” says a note by Motilal Oswal.

As a result of strong domestic flows, DII ownership of Indian equities has increased to 14.2 per cent in June 2022, from 10.9 per cent in June 2012.

FPI ownership has reduced to 18.4 per cent in June 2022, from 22.5 per cent in March 2015.

As a percentage of free-float market capitalisation, FPI ownership has declined to 38 per cent in June 2022, from 46.2 per cent in June 2012. DII ownership, however, has climbed to 29.5 per cent, from 24.2 per cent during this period.

About 70 per cent and 98 per cent of FPI holdings are in Nifty50 and Nifty 500 stocks, respectively. By comparison, 64 per cent of DII holdings are in the Nifty50 Index; 97 per cent in the top 500 companies.