Find out about the sell-off by foreign institutional investors
02-Jun-2022 •Karthik Anand Vijay
From their peak in October 2021, both the BSE Sensex and BSE 500 indices have fallen 10.7 per cent and 11.6 per cent, respectively. This might not seem like a lot at the index level but at the constituent level, the share price movement is more drastic. There are various reasons for the current choppy markets but we would like to bring your attention to certain numbers regarding the actions of foreign investors.
For the past eight months, i.e., from October 2021 to May 2022, foreign investors have been net sellers of Indian equities. They have sold close to Rs 2.06 lakh crore! The amount looks huge but that number represents only 4.2 per cent of their total assets under custody (equity), which is Rs 49.5 lakh crore as of September 30, 2021. What is striking is the huge inflow and outflow over a short span of two years. As a result, the aggregate net investment since March 2020 has been Rs 14,916 crore only.
The surprising fact is that given the quantum of the pullout by foreign investors, the benchmark indices have not cracked as much as one would have thought. Perhaps this is the sign of a maturing market and the rise of the domestic institutional investors fuelled by the rising SIP contributions.
Looking at the sector-wise investment data of FPI/FIIs, it is clear that the financial services sector has seen the highest drawdown. Between October 2021 to March 2022, FPIs pulled out about Rs 71,000 crore. This trend has continued in the current fiscal as well with FPIs' net investment of a negative Rs 21,246 crore. FPIs were net buyers in the retail sector over October 2021 - March 2022 period, pouring in close to Rs 14,000 crore. However, this figure is skewed by purchases of Rs 22,467 crore in November 2021 (possibly due to Nykaa and Paytm IPOs). For the remaining months, they have been net sellers.
Note: We have presented the table separately for October-March and April-May as the BSE sector classification system has changed since April 2022.