FPIs turned net sellers in 2022 for the first time in four years. Even though Indian equity markets saw the worst sell-off ever in 2022, the benchmark indices managed to close the year by climbing more than 3%. FIIs sold Indian stocks worth ₹ 2.78 lakh crore in 2022, and this was the first time in four years that FII flows turned negative.
“Concerns over Covid in China are negative, and the strong economic data from the US indicates continuation of the Fed’s hawkish stance, which is pushing bond yields up and equities down. In the first half of December, FPIs were buyers in auto, capital goods, FMCG, and real estate stocks. They were sellers in consumer durables, oil & gas, power, and financials. Macro data from the US and Covid news will drive FPI flows in the near term,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.
When we consider the data for the past year, FPIs sold stocks in sectors like IT, capital goods, textiles, consumer services, healthcare and realty among others. however, they bought shares in sectors like metals and mining, auto & components, oil & gas, financial services, FMCG, power and utilities, consumer durables, chemicals, telecommunication, forest materials, and media and entertainment.
FPIs have pressed the sell button on IT stocks ever since last year amid concerns over a recession, and lower technology spending in the US and Europe. A weaker rupee and lower attrition have helped IT companies recover margins, but analysts expect weaker revenue growth in 2023.
BofA Securities said that a protracted recession in the US could mean that FII outflows could continue in 2023 as well. However, domestic investing from provident funds, pension funds, insurance funds and SIPs could contribute about 1.65 lakh crores to Indian equity in 2023.
Goldman Sachs in a report suggested that FIIs could remain weak to start 2023 as equity leadership could shift towards China/North Asia (if China reopens faster than expected), but could pick up later during the year as domestic growth and the global macro environment is expected to improve.
Written by Simran Bafna
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