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FPIs may not rush back to India; holding in Nifty50 companies at 23-qtr low

Topics Markets | FPI outflow | FPI holdings

Most analysts expect the FPI flows into Indian equities to remain thin till the economic growth metrics show an improvement | Illustration by Binay Sinha
A massive sell-off in equities by foreign portfolio investors (FPIs) to the tune of Rs 48,029 crore ($6.37 billion) in the March 2020 quarter has seen their ownership in Nifty50 companies decline to 23-quarter low of 23.11 per cent during the period. Earlier, in September 2014, FPIs held an average 22.94 per cent stake in Nifty 50 companies.

The S&P BSE Sensex slipped 28.6 per cent during the recently concluded quarter, while the Nifty which declined 29.3 per cent, recorded its sharpest quarterly fall since the June 1992 quarter when it had tanked 32.2 per cent. In 2008-09, the Sensex had recorded a 37.9 per cent decline, while the Nifty slipped 36.2 per cent as the global financial crisis roiled the markets and the economy.

Most analysts expect the FPI flows into Indian equities to remain thin till the economic growth metrics show an improvement. Those Credit Suisse, for instance, expect more measures from the policymakers to help stem the economic fallout off the Covid-19 pandemic.

“FPI flows are less likely to come to India given the dwindling growth environment.  If growth does not recover in the next couple of quarters, India’s macro-fundamentals could be at risk of significant deterioration. Against this backdrop, the recent measures may not be enough and the government might have to provide more support in upcoming months,” wrote Jitendra Gohil, head of India equity research at Credit Suisse Wealth Management, India in a co-authored May 20 note with Premal Kamdar.

Of the total 50 companies from the Nifty index, FPIs has reduced their holdings in 45 companies during the recently concluded quarter. While, in four companies they raised their stake by less than one percentage points, only in Bharti Airtel, FPIs holding increased by 3.89 percentage points to 20.29 per cent, due to fund raising via qualified institutional placement (QIP). In six companies – Hindalco Industries, Cipla, Grasim Industries, Axis Bank, Tata Steel and Eicher Motors, FPIs cut their stake by over two percentage points, while in 21 companies, their holdings declined in the range of one percentage points to two percentage points.

U R Bhat, managing director at Dalton Capital, too, does not expect FPIs to rush back to India in a hurry. The policy measures undertaken by other countries, he says, are far better than in India and hence will aid faster economic recovery.

“The economic response from the Indian government to the pandemic has been far less as compared to the developed markets, such as the US where there is talk of another round of stimulus. India will continue to lag global peers and may not attract much FPI / FII investment in the short-run,” he says.

However, Nischal Maheshwari, chief executive officer for institutional equities at Centrum Broking believes investors are likely to look beyond the disappointment of the government stimulus package and rising coronavirus cases.

“Focus will remain skewed towards the opening up of the economy as mobility looks to pick up with the opening of airports next week. As global markets move beyond pricing the Covid-19 impact, increasing global tensions between US and China could be the potential next trigger for a market sell-off. Thus, FPIs will remain cautious and will closely watch more of global developments, which will set the course for their investment rationale,” he says.

Quarter ended Ownership in %
FPIs Public Promoter
Mar-18 24.00 7.29 43.74
Jun-18 23.62 7.15 45.64
Sep-18 24.01 7.52 42.50
Dec-18 23.77 7.64 42.53
Mar-19 23.65 7.43 42.83
Jun-19 24.36 7.53 42.47
Sep-19 24.70 7.62 41.26
Dec-19 24.62 7.59 42.19
Mar-20 23.11 7.73 44.07
Ownership of Nifty-50 
Source: CapitalinePlus

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