Summarize

Simplifying... Inshort

Foreign investors' stake in Indian stocks has hit a 10-year low, with a shift towards mid and small-cap stocks.
Despite market volatility, mutual fund inflows have been on the rise, particularly in private banks, energy, industrials, and healthcare sectors.
However, there's been a significant outflow from financials, discretionary consumption, and FMCG sectors, while IT, energy, power, and telecom sectors have seen inflows.

Was a long read? Making it simpler...

Next Article

FPIs sold Rs. 25,744 crore worth of stocks in January which is the highest in a year

Stake of foreign investors in Indian stocks hits 10-year low

By Pratyaksh Srivastava

Feb 27, 2024

05:12 pm

What's the story

Foreign portfolio investors (FPIs) saw their combined stake in Indian stocks drop to a 10-year low of 16.3% in January 2024, as revealed by ICICI Securities. FPIs held Rs. 62 lakh crore in Indian equities, compared to the total market capitalization of Rs. 380 lakh crore. This decline is due to increased selling in CY24TD (calender year to date), totaling around $3.5 billion and the strong performance of small-cap stocks, where FPIs have a smaller presence.

Sector-wise investments

FPI portfolio orientation and sectoral flows

As of December 2022, FPIs had 78% of their portfolio in large-cap stocks, while mid and small-cap holdings were at 14% and 8%, respectively, based on the top 1,000 stocks by market capitalization. However, FPI investments in mid- and small-cap stocks increased more than in large-caps during CY23, raising their holdings to 17% and 9%. Financials, industrials, IT, and auto sectors saw the most significant inflows within mid- and small-cap stocks.

SIPs & Mutual Funds

Active mutual funds portfolios and SIP inflows

Active mutual funds have continued to buy across various sectors in CY24, led by private banks, energy, industrials, and healthcare. Selling was observed in utilities, telecom, media, and IT during January 2024. Despite market volatility, SIP inflows have steadily increased, reaching over $2 billion per month. Inflows into active market cap-based mutual fund schemes continued in January 2024, led by mid-cap (Rs. 2,600 crore), multi-cap (Rs. 1,800 crore) and small-cap (Rs. 1,700 crore) schemes.

Major outflows

Outlook for equity flows and FPI activity

So far this year, the markets have seen an outflow of Rs. 24,616 crore and an inflow of at least Rs. 18,633 crore. Major outflows were observed in financials, discretionary consumption, and FMCG sectors, while inflows were seen in IT, energy, power, and telecom sectors. From a macro perspective, India's relatively stable GDP growth and corporate earnings, along with the likelihood of moderating interest rates, are positive for institutional flows toward the country.