Foreign fund holdings in domestic stocks fell to pre-Covid lows in March
Bombay:
Foreign fund holdings in domestic stocks fell to pre-Covid lows, reaching a multi-year low of 19.5 percent in March of this year in NSE500 companies worth $619 billion, an analysis shows.
The FPI holding of 19.5% in March 2022 is the lowest in the last three years, when it was 19.3% in March 2019, a period before Covid.
On an annualized basis, their ownership was 21.2 percent, the second-highest record in March 2021, according to a report by Wall Street brokerage Bank of America Securities India.
Foreign funds’ holdings in domestic equities stood at 18.6 percent in December 2017, their lowest in five years, and peaked in December 2021, when they owned 21.4 percent of domestic equities.
Significantly, the share loss of foreign portfolio investors (FPIs) has been well-adjusted by soaring ownership of the stock by domestic funds, which pumped $6 billion in March and $14.6 billion in 2021-22, the report said.
Of the $619 billion in FPI property, the highest incremental allocation was in energy stocks at 16.2 percent, followed by IT at 14.8 percent and communications services at 4 percent.
In terms of overall allocation, financial institutions still led the chart at 31.4 percent, followed by discretionary (9 percent).
In March alone, FPI outflows were for the sixth straight month, the worst since March 2020 (following fears of a pandemic) due to lingering geopolitical risks, increased inflation led by supply-side problems, rising commodity costs, the report said. .
Even amid the pullout, emerging market funds have steadily increased their allocation to India (19 percent in March versus 13.3 percent in January 2021) compared to China (34.6 percent in March versus 42.2 percent in January 2021). ).
Similarly, MSCI India’s valuation premium for emerging markets is still at 38 percent and for the world at 10 percent above the respective long-term average remains high, but in the long run this premium is justified as India is better positioned among emerging markets, the report said. .
Besides India, other emerging markets including Taiwan, Korea and the Philippines have also seen massive outflows so far this fiscal year.
The record drop was mainly due to massive outflows of $5.4 billion in March and a whopping $15.7 billion in 2021-22. Such a massive pullout came after they pumped in $23 billion in 2020 and $3.7 billion in 2021.
The Wall Street brokerage expects the market to trade sideways in the near term, given rising inflation impacting volume growth and margins across sectors.
The brokerage did not offer any advantage over its December target of 17,000, but said it favors financials, industrials, select autos among cyclical stocks and utilities and health care among defensive stocks.
