FPI holdings in domestic equities down

Foreign capital flows have ebbed in the current calendar year after a bumper $23billion inflows in 2020!

While net inflows remained in positive territory in 2021 it’s been the second worst year after 2018 for Indian equities as far as foreign portfolio investments are concerned.

Overall net inflows into equities during the calendar year dropped to $39 billion as investors pulled out $38 billion in the second half of the year

Foreign portfolio investors dumped Indian shares after the benchmarks hit new lifetime highs in October this year.

Despite the outflows from secondary markets FPIs continued to bet strongly on the primary market during the period show data available on NSDL & CDSL

During the calendar year FPI investments in the primary market hit $107 billion compared with the $98 billion they invested in calendar 2020.
Analysts say global investors were sitting on huge profits since 2015 and after a stellar run of markets in 2021 the outflows during the year can be seen as healthy profitbooking by these investors.

Further the US Federal Reserve’s tapering programme prospects of rate hikes continued impact of Covid19 and expensive valuations of Indian markets against other emerging markets also weighed on the sentiment and kept global investors on the edge during the year.

“We had a spectacular run this calendar year and India was the best performing market among all other emerging markets so we saw some profit booking towards the yearend especially in November and December

This is the worst flow since 2018 — when FPIs were net sellers to the tune of Rs 33014 crore This is also quite surprising where we have usually seen when the market moves FPI flows also move in line

One should understand that they are the largest owners of equity in India so any selloffrise is directly correlated” Rahul Shah senior vicepresident group advisory leaderPCG broking & distribution Motilal Oswal Financial Services told FE.

The primary markets however enjoyed heightened interest from these investors during calendar year 2021 with inflows of $107 billion during the period.

Interestingly between October and November a large chunk of the foreign investments were diverted to primary markets from secondary markets as some big ticket public issues like Paytm Nykaa and other big newage techhnology companies tapped the capital markets.

In the previous calendar year nonresident investors bought Indian equities worth $2337 billion in CY2020 which is so far the best after 2012 show data available on depositories

Around 26% of the inflows in the last 30 years by FPIs in Indian equities came between 20202021 Further according to a report released by CLSA in November in the 12 months from April 2020 through the end of March 2021 net purchases of Indian equities by nonresident investors surged by $384 billion or by 18% of total market capitalisation versus a cumulative $87 billion recorded in the five previous years.

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