After recording $23 billion in additional investment in domestic equities in FY21, foreign funds significantly reduced their new exposure to the country to $3.7 billion in FY22, and also reduced their holdings in the NSE500 to 19.9 percent, or $582 billion. , down from its peak of 21.4 percent, the brokerage report shows.
During the current fiscal year until early this week, the cumulative outflows of the foreign investment index touched a record high of 14.6 billion US dollars, March alone saw them reach 5.4 billion US dollars, while February saw another record withdrawals of 4.7 billion US dollars, according to an analysis by Wall Street brokerage Bank of America Securities India.
FPI’s holdings were $582 billion as of March 15, 2022 (down from $667 billion at peak September 2021), of which information technology (15%, up 87 basis points), energy (15.5%, up 44 basis points), And Healthcare (4.9 percent, up 22 basis points) saw higher allocations.
On the other hand, financial provisions decreased by 107 basis points to 31.5 percent, an estimated decrease of 49 basis points to reach 9.1 percent.
In contrast, the holding of local funds in the Near East world was only $265 billion as of February 2022, on the back of a new $13.1 billion being allocated.
However, the foreign investment index’s holding value fell significantly from the record $667 billion in the first half of FY22, which represents a full $112 billion addition between April 1 and September 30, 2021, according to an earlier report from Bank of America.
The FPI holding was valued at $555 billion as of March 2021, a full $105 billion increase over the value between September 2020 and March 2021.
As of June 2021, FII’s investments were only $592 billion, meaning that as the market frantically recovered, the value of their holdings had jumped by $38 billion even though their additional net investment was nearly zero between this period.
According to the report, the market is not bleeding too hard as local institutional investors have been very active and pumped in US$13.1 billion per year of which US$5 billion was in February alone, leaving the net outflow from the market at just US$1. 5 billion.
According to the report, US$5.4 billion in FDI outflows in March was the sixth consecutive month of outflows bringing the cumulative withdrawal to US$14.6 billion on the back of heightened geopolitical risks.
The outflows in March were the most severe since March 2020 after the pandemic hit the world.
Since late March after Russia invaded Ukraine, the market has been tense. The outflows are gaining more momentum with the US Federal Reserve raising interest rates by 25 basis points and halting the other six rounds of rate hikes this year.
While the FPI ownership of local shares peaked in December 2020 at 21.4 percent, which declined to 21.2 percent in March 2021, and by December 2021, it had fallen to 19.9 percent, according to the report.
In comparison, FII’s inflows to other emerging markets so far in 2022 have seen significant outflows while Brazil’s led inflows amounted to US$11.7 billion.
As of March 15, energy ($74 million and healthcare ($46 million) had inflows, while there were negative deployments to other sectors such as finance ($2.9 billion), industry ($651 million), and discretionary (US$1.2 billion), which was the highest outflow since March 2017.
IT outflows (US$80 million) slowed significantly after two consecutive months of heavy outflows (average US$1.8 billion).
2021 saw the song’s primary market see a record IPO fundraising of $16 billion, and although volatility has slowed/delayed initial issuances, the 2022 pipeline remains strong with an estimated $13 billion issuance LIC of $8 billion.
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