‘FPI ownership in stocks falls below pre-Covid levels’

In the calendar year 2022, India saw heavy outflows second only to Taiwan, while Brazil led inflows ($12.5 billion). While EM funds have steadily increased allocation to India (19 per cent in March 2022 as against 13.3 per cent in January 2021) versus China (34.6 per cent in March 2022 against 42.2 per cent in January 2021), India’s overweight position is currently near multi-year lows, with outflows potentially stemming/reversing, this could turn around.

In April 2022, however, Indian markets saw outflows slow down ($1.2 billion), indicating potential stemming or reversal of FII outflows. In the calendar year 2022, flows stood at $15.7 billion.

Domestic institutional investors (DIIs), on the other hand, remain upbeat with monthly flows touching new highs at $6 billion (19 per cent rise month-on-month), crossing $5 billion mark for the second consecutive month. DII inflows were $ 14.6 billion up to the year ended March 2022.

“We expect markets to be sideways near term given inflation impacting volume growth and margins across several sectors. Our year end Nifty target of 17,000 offers no upside but we prefer financials, industrials, select autos among cyclicals and utilities and healthcare among defensives,” BoFA Securities said.

Sector-wise, as of March 2022, FPI inflows were largely skewed in favour of energy ($871 million, near February 2021 highs). Utilities ($39 million) and healthcare ($35 million) witnessed marginally positive inflows, while there were negative deployments across other sectors. Financials ($3.5 billion), industrials ($724 million), discretionary ($1.3 billion) saw highest outflows since March 2017. Outflows in IT ($80 million) slowed significantly while materials saw heavy outflows ($520 million).