The value of the foreign portfolio investors’ (FPI) holdings in the domestic equities reached a record USD 555 billion in 2020-21, a whopping USD 105 billion growth between September 2020 and March 2021, according to a report.
As against this, the value of the domestic institutional investors at USD 203 billion was not even half, according to the data compiled by Bank of America (BofA) Securities.
FPIs have put in more money into the markets since then, having invested net USD 7.2 billion till April 16 (Year-To-Date 2021), making the country the only market that has seen net positive inflows in the year, despite a dip in March when it slowed to USD 1.4 billion from USD 3.5 billion in February and USD 2.2 billion in January.
That means so far YTD 2021 they have net added zero investment unlike in all other emerging markets which saw massive outflows.
In 2020-21, FPIs, which have been the main driver of domestic equities, have pumped in a record USD 37 billion or Rs 2.75 lakh crore into the equities, the highest in two decades, according to the data from the National Securities Depository.
Previously, in fiscal years 2010, 2011 and 2013, FPI inflows had crossed USD20 billion. Investments zoomed as major central banks pumped in trillions of dollars to try and revive the pandemic-hit economies, flooding markets with liquidity.
On the other hand, the domestic institutional investor inflows remained at a negative Rs 1.38 lakh crore in 2020-21 taking the total value of their holdings to USD 203 billion, spread across exchange traded funds (USD 38 billion), large-cap fund (USD 24 billion), flexi cap funds (USD 22 billion) and mid-cap fund (USD 16 billion), it said.
According to the report, after pumping a record USD 37 billion in 2020-21, the value of the FPI holding in the domestic equities is at a record high of USD 555 billion, which was only USD 450 billion at the end of September 2020 or 21.4 per cent of the market capitalisation.
As of June 2020 quarter, the value of FII investments in equities stood at USD 344 billion or 18.7 per cent of the market cap, which means in just three months, it has jumped 31 per cent. In September 2019, the value of FII investments was USD 429 billion.
Meanwhile, the report also said domestic institutional investors also turned net buyer of the equities till April 16 (YTD21), with a net addition of USD2.2 billion which is back to pre-pandemic level– they became net buyers in March after being net sellers for the past eight months in a row.
For FPIs, real estate/financials/energy were the main investments, while for DIIs it was more thematic funds, mid-cap funds, large & mid-cap fund.
So far in 2021, active funds drove the flows (USD1.2 billion) vs passive funds (USD263 million), taking the YTD 2021 FII inflows at USD7.2 billion until April 16.
As against this, FPIs have been net sellers in major EMs in Arpil– Taiwan (-USD5.5 billion), South Korea (-USD1.3 billion) and Brazil (-USD828 million). YTD inflows for India (USD7.4 billion), Taiwan (-USD10.6 billion), South Korea (-USD14.1 billion) and Brazil (USD3.1 billion).
FPI flows’ sectoral deployment in the country were skewed in favour of real estate (+USD500 million), financials (USD374 million) and energy (USD311 million), whereas it was -USD330 million in IT, -USD223 million in healthcare and -USD31 million in utilities.
Of the USD555 billion of investment/holdings, the maximum was in financials at 36.2 per cent, followed by IT at 13.8 per cent, energy at 13.3 per cent and in utilities at 2.6 per cent, materials at 2.2 per cent and real estate at 1.03 per cent.
The NSE500 stocks are owned majority by the founders (46 per cent), FIIs (20 per cent), retail investors (9 per cent), domestic mutual funds (7 per cent), government (5.5 per cent) and banks, financial institutions and insurers (5 per cent).
Since December 2020, the ownership patterns have changed quite for founders (up 120 basis points), retail (up 20 bps) and FIIs (-150 bps).
India MSCI valuation premium to EMs is now at 41 per cent, which is 1 per cent below long term average.