What FIIs bought and sold in the month of June 2023

In the last 2 months, the FPIs have been major investors in the Indian markets. The FPIs infused over $5.3 billion in May and another $5.5 billion in June. In the last 2 months, FIIs have been aggressively buying into Indian stocks. What are the sectors that FPIs preferred and what were the sectors that they shunned. But first let us look at a macro picture.

Charting the course of FPI flows in 2023

Here is how the FPI flows in the first 6 months of calendar year 2023 look like.

Data Source: NSDL (all figures are Rupees in crore). Negative figures in brackets

Here are some key takeaways from the table above.
    • The year began on a weak note with FPI selling equities worth Rs28,852 crore in the month of January and the selling continued in February also. However, from March onwards, the FPIs have been net sellers.

    • The momentum built up in May and June when the FPIs infused $11 billion into Indian equities and they have already infused another $2 billion in three days of July. Favourable macros are making FPIs positive on India.

    • FPIs have also started investing into debt and have infused nearly $2 billion into debt in the current calendar year on cumulative basis. That is more due to attractive real rates, which are well above 1.5% in the Indian context.

    • The IPO flows are yet to pick up momentum with only the Mankind Pharma IPO seeing some genuine build-up of interest from the FPIs. Otherwise, FPIs have been neutral on the IPO story, in the absence of any big names in the market.

Let us now turn to what the FPIs bought and sold at a sectoral level in June 2023.

FPIs long on Financials, Auto, but short on IT

Here is a sectoral break-up of the FPI flows into Indian equities in the month of June 2023

Data Source: NSDL

In a month when the FPIs infused $5.5 billion into Indian equities, you are bound to see a lot of positive sectors. Here are 3 key takeaways from the buy side of FPIs.

Financials attracted more than $2 billion for the second month in a row. There was a lot of recuperative buying in BFSI space, including in banks, NBFCs and also insurance. Lower rate expectations also enhanced the best on the financial sector.

There is a bet on consumer proxies. Automobiles saw FPI inflows of $709 million while FMCG saw FPI inflows of $239 billion. Both are a bet on rising revenge consumption as well as a gradual pick-up in rural demand, which was seen after 6 quarters of weakness.

FPIs are starting to bet on a positive capital investment cycle in the month of June. For instance, Capital goods attracted $678 billion of FPI flows, construction $352 million and power $320 million.

Let us now turn to the sectors where FPIs were selling. No prizes for guessing, but once again it was IT where the FPIs remained cautious. There are a number of reasons for the same. The table below captures the sectors that saw selling by the FPIs in the month of June 2023.

The IT sector continued to attract selling of $408 million. Most of the FPIs continued to remain cautious about weak tech spending and pressure on contract pricing for the Indian IT companies. The other sector to see selling was the oil & gas sector. With upstream oil  hit by weak prices and downstream by falling GRM (gross refining margins), the FPIs have stayed cautious on the oil sector.

Why were FPIs net buyers in May and June 2023?

There was a good deal of buying from active and passive funds. Hence the buying decisions were more at a macro level. Hence, the sectors with high weightage saw the bulk of the buying; although IT and oil were exceptions. Buying in financial services was a simple corollary to the RBI holding repo rates at 6.5% for the second policy in a row. The markets also gave positive triggers in the form of falling current account deficit (CAD) and higher US GDP projections. Much of the buying in banks was as a proxy for the macro India story as no story represents the India story better than the banks, with their substantial weightage. Other sectors that attracted FPI inflows included; automobiles and ancillaries which saw buying on the back of sustained order flows, overflowing order book positions and sharp reduction in operating and manufacturing costs. 

FIIs are also betting that the long awaited revival of capital cycle should finally happen now. If you look at the 3 sensitive sectors like capital goods, construction and Power, these sectors saw overall inflows of $1.35 billion. It is this story of the revival of the companies tracking the bounce in the capital cycle that is the real takeaway from the FII buying story in the month of June 2023.