FPI holdings go up by $112 billion in H1 FY22, says report

The holdings of foreign portfolio investors in India’s equity markets have gone up by $112 billion to hit $667 billion towards the end of the first half of the current financial year (April to September 2021), according to a brokerage report.

Out of the $667-billion FPI assets under management, the highest year-to-date allocation was in the IT and energy sectors, while financials and industrials saw the lowest year-to-date allocations. Utilities, telecom and discretionary sectors saw improved allocations, as per news reports.

A sustained stock market rally is one of the reasons

The stock market has been on a sustained rally ever since the low of March 2020, when the BSE benchmark index, the Sensex plummeted to a low of a 25-k level. Ever since, the Sensex has touched new landmarks, including the 50,000 levels in early 2021 to the 60,000 level in September. On October 19, the Sensex touched the 62-k level. The rally has also brought in foreign investor participation in the equity markets. Further, global liquidity as major economies have brought in stimulus packages and kept interest rates at their lowest are also reasons that have contributed to the FPI surge.

According to the latest report, the FPI holding up to March 2021 was $555 billion. Between September 2020 and March 2021, foreign portfolio investors had a wealth of $450 billion. This indicates that there was an addition of $105 billion during that period, ie, the second half of FY21. Reports show that FPI inflow in India’s equity markets stood at $592 billion as of June 2021. Between March 2021 and June 2021, the value of FPI holdings increased by $38 billion.

In the latest six-month period (April to September ‘21), there has been a slightly higher addition, ie, $112 billion than the $105 billion that was added in the six-month period till March 2021. August 2021 saw a slump in FPI inflow when foreign investors ploughed in $281 million, which reportedly was the lowest such a monthly investment ever since February 2020.

India sees largest year-to-date FPI inflow

At $8.8 billion, India has the largest year-to-date FPI inflow among emerging markets in September 2021, according to a report. Emerging markets such as Taiwan and South Korea saw outflows of $16.7 billion and $25.5 billion year-to-date. Barring India, only Brazil saw an FPI inflow of $8.1 billion year-to-date. Of the $8.8 billion FPI inflow into domestic equities for the first nine months of this calendar year, data shows that a little over $5 billion has come in via the IPO route alone, while the remaining $3.7 billion has come in through the secondary markets.

It may be recalled that in 2020-21, foreign portfolio investors, who have driven the domestic equity markets, channelised $37 billion or Rs 2.75 lakh crore, which is reportedly the highest such an investment in two decades. Reports show that foreign portfolio investments crossed $20 billion in the fiscal years 2010, 2011 and 2013. Although India saw a technical recession and lockdowns because of the Covid-19 pandemic, the fiscal year 2021 alone saw 26 per cent of the overall FPI equity inflows of the last 30 years, as per data.

Although the second wave of the pandemic negatively impacted FPI equity inflows during April and May 2021, June ‘21 saw a recovery and FPIs turned net buyers for the month, infusing $2.35 billion into the equity market.

Record September

In September 2021 alone, Indian equities saw an infusion of nearly $1.8 billion into equities. It may be recalled that regulatory issues in China and a real estate giant’s crisis meant that many foreign portfolio investors had sought to invest in India during the recent past, according to experts. According to depository data, almost 30 per cent of all FPI inflow into stocks and debt instruments to date in the calendar year 2021 has come from the month of September alone. The pace of vaccinations has picked up and fears of a severe third wave remain muted, which experts say may have lifted foreign portfolio investors’ confidence.

Conclusion

The value of FPI’s holdings in the country’s equities has gone up by $112 billion to touch $667 billion between April 1 and September 30, 2021, even as India’s markets have continued to rally after the lows of March 2020.

FAQs

What does foreign portfolio investment mean?

Foreign portfolio investment refers to the investors who invest in overseas financial assets and securities. Investors could be individuals, companies or even government bodies.

When did India record its highest FPI inflow?

India saw the highest FPI inflow into its equity markets during FY 2020-21, receiving nearly Rs 2.75 lakh crore or $37 billion.

What is the value of FPI holdings in India’s equities between April and September 21?

FPI holdings in Indian equities have gone by $112 billion to touch $667 billion in the six months from April to September 2021.