FPI holding in Indian stocks hit a decadal low of 16.6% in November despite strong domestic fundamentals
₹54.5 lakh crore, implying 16.6% holdings of overall Indian equities as of November 2023 which is the lowest since 2012, as per ICICI Securities. FPIs have sold Indian equities worth more than ₹40,000 crore since September this year.
Also Read: Jefferies adds Coal India, Honasa, Eicher Motors, HDFC Bank, IPru Life to its model portfolio “Currently, the drop in FPI holdings is due to sharp selling observed since September 2023 and also underperformance due to their portfolio orientation (for example: Underperformance of their overweight position in high-quality relatively expensive financial stocks and outperformance of their underweight position in industrials)," ICICI Securities said in a report. Moreover, the sharp outperformance of mid, small and microcaps where FPIs have lesser holdings has resulted in a dip in FPI holdings of overall Indian equities.
(Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) The recent surge in US Treasury yields above 3.5-4% after September spooked capital markets even as the US Federal Reserve approached the end of its rate hike cycle driven by a moderating inflation outlook. The decadal-low FPI equity holdings are ironic given Indian fundamentals are approaching their historical best.
The brokerage believes favourable cycles in terms of corporate profits, investment rate, NPAs, tax buoyancy, current account, inflation etc. have the potential to reverse record-low FPI holdings as yield spike fears recede and valuations turn reasonable.
However, election-related uncertainty could add volatility to near-term flows. Also Read: Reliance, Gail, IOC’s petchem margins to remain suppressed, says
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