According to a survey, the value of foreign portfolio investors (FPI) holdings in domestic equities hit a new high of $555 billion in 2020-21, an increase of $105 billion from September 2020 to March 2021.
In contrast, according to data collected by Bank of America (BofA) Securities, the valuation of domestic institutional investors was just $203 billion, less than half of that. Facing a slowdown in March, when it slowed to $1.4 billion from $3.5 billion in February and $2.2 billion in January, FPIs have continued to pour capital into the markets, investing a total of $7.2 billion through April 16 (Year-To-Date 2021), making the nation the only market with net positive inflows for the year. That means they have net added zero investment so far in 2021, as opposed to large outflows in all other emerging markets.
According to data from the National Securities Depository, foreign institutional investors (FIIs), who have become the biggest driver of domestic equities, pumped in a whopping $37 billion (Rs 2.75 lakh crore) in 2020-21, the highest in two decades.
FPI inflows had already surpassed $20 billion in fiscal years 2010, 2011, and 2013. Investments soared as global central banks poured trillions of dollars into pandemic-affected economies, flooding the markets with liquidity. Domestic institutional investor inflows, on the other hand, remained negative Rs 1.38 lakh crore in 2020-21, bringing their cumulative holdings to $203 billion, spread through exchange-traded funds ($38 billion), large-cap funds ($24 billion), Flexi cap funds ($22 billion), and mid-cap funds ($16 billion), according to the study.
The value of the FPI holding in domestic equities is at a record high of $555 billion, according to the survey, after pumping a record $37 billion in 2020-21. It was just $450 billion at the end of September 2020, or 21.4% of the market capitalisation.
The value of FII investments in equities was $344 billion in the June 2020 period, accounting for 18.7% of the market capitalization, up 31% in just three months. FII investments were worth $429 billion in September 2019. Domestic institutional investors, meanwhile, became net buyers of equities until April 16 (YTD21), with a net addition of $2.2 billion, returning to pre-pandemic levels— they became net buyers in March after being net sellers for the previous eight months in a row.
The main investments for FPIs were real estate, financials, and oil, while thematic funds, mid-cap funds, and large & mid-cap funds were the main investments for DIIs. Active funds ($1.2 billion) have led the way in 2021, with passive funds ($263 million), bringing the total YTD FII inflows to $7.2 billion through April 16.
In contrast, FPIs were net sellers in big EMs in April, including Taiwan ($5.5 billion), South Korea ($1.3 billion), and Brazil ($828 million). India ($7.4 billion), Taiwan ($10.6 billion), South Korea ($14.1 billion), and Brazil ($3.1 billion) have all received inflows this year.
The country’s FPI flows were distorted in favour of real estate (+$500 million), financials ($374 million), and electricity ($311 million), while IT, healthcare, and utilities were minus-$330 million, minus-$223 million, and utilities were minus-$31 million.
Financials accounted for the most of the $555 billion in investment/holdings, with 36.2%, followed by IT (13.8%), electricity (13.3%), infrastructure (2.6%), materials (2.2%), and real estate (1.03%). The founders (46%), FIIs (20%), institutional investors (9%), domestic mutual funds (7%), the government (5.5%), and banks, financial institutions, and insurers (5.5%) hold the bulk of the NSE500 stocks (5%). For founders (up 120 basis points), retail (up 20 basis points), and FIIs, ownership trends have changed dramatically since December 2020. (-150 bps). India’s MSCI valuation premium to emerging markets is now 41%, down 1% from its long-term average.
