Foreign portfolio investors (FPIs), which own more than 24 per cent of the domestic market, pumped in a record USD 8.1 billion last month, highest in 12 years, and at USD 5 billion to date, December also looks to get record inflows, says a foreign brokerage report. At USD 8.1 billion, India has received the highest FPI inflows among the emerging market peers in November, as Brazil got only USD 6.2 billion, South Korea (USD 5.2 billion), Taiwan (USD 4.5 billion) and Thailand at USD 1.1 billion.
This inflow had the valuation premium of India to other emerging markets in the MSCI Index shooting up by 5 percentage point to 46 per cent and is 5 per cent above the long-term average, says Bank of America Securities in a report on Monday. Meanwhile, with over USD 2 billion pullout, the domestic funds turned negative on the market in November.
At over USD 8.1 billion, FPIs inflows are the highest in 12 years in November, while with over USD 2 billion redemptions, domestic funds were net sellers in the month. The fund inflows were driven by active funds, BofA Securities said. Even in August, FPIs had pumped in a record USD6.3 billion into equities. FII inflows of USD 5 billion in December to date is exceptionally strong, the report said.
According to BofA, FPIs parked their maximum funds in financials at USD 4 billion, followed by discretionary stocks at USD 854 million and industrials at USD 687 million and had the least interest in it where they picked up on stocks worth USD 104 million and real estate wherein they pulled out USD 58 million. A potential return of loan growth can act as a trigger for well-run and well-capitalized private sector financial stocks like HDFC Bank, ICICI Bank and HDFC to out perform, says the report. The brokerage is also overweight on industrials & materials sectors where it sees scope for further FII repositioning on improving traction on government's capex push.
Of the over USD 8.1 billion FPI flows, as much as USD 8 billion came from active funds. However, in contrast to negative trend seen in the past 10 months, passive funds witnessed USD99 million inflows in the month. Another boost came from IPOs which fetched USD 0.7 billion in the month, says the report. In contrast to robust FII flows, DII flows remained at negative USD 2 billion. While active funds continued to see net outflows of USD2.1 billion for the fifth month in a row in November, passive funds improved by 116 per cent month-on-month to USD 57 million, as against -USD351 million in October.
As of end-November, FPIs increased their overweight positions in financials by 4.75 per cent, IT by 1.48 per cent, and discretionary by 0.03 per cent and were underweight on materials by 8.9 per cent, healthcare by 0.64 per cent, utilities by 0.56 per cent, telecom by 0.37 per cent, staples by 0.33 per cent and industrials by 0.31 per cent. It can be noted FPI investments have topped the USD20 billion mark so far this year, which is highest since 2012 in dollar terms. Previously, only in 2010 and 2012, FPI inflows were over USD20 billion.
Since October, the market rallied a whopping 18 per cent.