Inflows in Indian equities was close to Rs 1 lakh-crore-mark in 2019 (CY19), as Foreign institutional investors (FIIs) were aggressively buying Indian stocks during this period.
According to the NSDL data, thus far in CY19 FIIs have pumped in net Rs 99,966 crore in equities, which is the highest since 2013. In 2013, foreign investors bought equities worth Rs 1.1 lakh crore.
In 2019, only 3 months (January, July, August), witnessed foreign outflows. The inflows, however, did not kick start on a strong note this year. FIIs were net sellers in Indian equities worth Rs 4,262 crore in January. The pace of foreign money inflows started picking from February and, over the following five months, FIIs invested Rs 82,910 crore.
The inflows dramatically declined in the second half of the year due to muted Q2, the slowdown in consumer demand, and falling growth. Since July 2019, the overall inflows in equities stood at Rs 21,318 crore. In the first six months (January-June), this figure was Rs 78,648 crore.
After June, FIIs turned net sellers again for the subsequent two months, selling Rs 12,419 crore and Rs 17,592 crore in July and August, respectively. A host of events dented foreign investors’ confidence during those months in India including an increase in the tax on super-rich or foreign portfolio investors (FPIs) in the July 2019 Union Budget, poor to mixed corporate earnings in recent quarters, overhang on economic growth locally, and the US-China trade war.
Quarter-wise, FPIs invested Rs 43,781 crore during October – December CY19, after pulling out Rs 22,463 crore from Indian equities during the July-September quarter of CY19 from the equity market. In the January-March quarter, the investors added Rs 46,939 crore and in April-June quarter they invested Rs 31,709 crore in Indian equities.
The strong inflows led the benchmark indices to hit multiple record highs during the year with the S&P BSE Sensex up 15 percent and the Nifty 50 up 12 percent in 2019. This is their second-best performance in the past five calendar years.
In 2017, the Sensex and Nifty had rallied 28 percent and 29 percent respectively, on healthy inflows by FPIs ( Rs 51,252 crore).
For the inflows to continue, analysts now expect the Reserve Bank of India (RBI) to keep cutting interest rates despite a surprise spike in inflation to curb the slowing growth.
According to a report by ICICI Direct, the highest increase in FII ownership was observed in Bharti Airtel and Power Grid among Nifty stocks. From BFSI space, Kotak Bank and Bajaj Finance outperformed markets with FII ownership remaining intact, however, Bajaj Finserv saw a substantial increase in FII ownership, it stated.
The report also added that consumption stocks like Nestle and Hindustan Unilever saw no dilution in FIIs’ holding while FIIs’ ownership increased substantially in Asian Paints. Meanwhile, in pharma space, Dr Reddy’s bucked the sectoral trend and witnessed a gradual increase in FIIs’ stake, it further noted.
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First Published: IST