The ongoing selling by FPI (Foreign Portfolio Investors) in Indian equities is turning out to be the highest selling spree since the global financial crisis 2008, said ICICI Securities in a note. Further, analysts at the brokerage firm said that IT and financial stocks have seen the highest outflows amid this selling spree. “Sectorally, bulk of the FPI selling on 12-month rolling basis has been concentrated around financials and IT (93% contribution) along with FMCG, other services and construction materials whereas metals, power, discretionary consumption and telecom saw inflow,” ICICI Securities said.
Financials, IT see massive outflows
Comparing FPI’s AUM in the financial sector in May 2021 and June 2022, ICICI Securities noted a drop to Rs 12,856 billion from Rs 15,218 billion earlier. Meanwhile, AUM in the IT and hardware space has come down to Rs 5,094 billion from Rs 5,681 billion in May 2021. Tracking FPI flows from June 2021 to date, financials have seen outflows worth Rs 1,067 billion while IT has seen outflows worth Rs 765 billion. Other sectors that have seen net outflows include construction material, FMCG, and oil & gas.
Sectors such as metal and mining, Industrials, Construction, capital goods, power, discretionary consumption, and telecom.
FPI exodus exceeded 2008
With the trailing 12-month FPI cumulative selling in the secondary market of $53 billion against $28 billion during the GFC, as per provisional flows data from exchanges, the exodus of FPI funds is greater than the financial crisis. “However, trailing net institutional outflows (FPI flows + DII flows), based on provisional data for secondary market flows, is relatively lower at $10.6 billion compared to GFC peak outflow of $8.6 billion, supported by significant inflows from DIIs of $42.5 billion.
Valuations now comfortably
Analysts said that the massive outflows from Indian equities by FPIs have been largely driven by the fear of aggressive quantitative tightening by the US central bank to tame inflation and relatively higher valuations of Indian equities. “However, valuations have rationalised significantly from October 2021 levels and the fear of a structural increase in inflation is reducing as global commodity prices decline over the recent past which should build confidence of slowing down of FPI outflows incrementally,” they added. ICICI Securities said that risk still remains in terms of elevated CPI inflation and crude oil prices which are yet to climb down meaningfully from their recent peaks.