No prop for market; FPI flows to stocks in 2015 third worst in 13 years

NEW DELHI: To some, the Rs 5,800 crore outflow of foreign portfolio investment from equities in November is nothing but an aberration of an overall trend. But data suggest the pace of FPI flow that came into India in the first 11 months of 2015 was third lowest in last 13 years.

One can judge the slowdown in foreign inflows this year from the fact that only in 2011 and 2008, the worst years for equities in the past decade, had the market witnessed poorer flows than what we have seen so far this year.

Data available with depository NSDL showed FPIs have pumped only Rs 21,863 crore into domestic equities this year in contrast with an average of nearly Rs 1,00,000 crore that flowed into the domestic equity market in the comparable period of last three years.

By November, India had witnessed an inflow of Rs 96,018 crore in 2014, Rs 97,050 crore in 2013 and Rs 1,03,272.10 crore in 2012.

“Fortunately, domestic flows have been very strong. Global flows have been muted and even negative in certain months mainly due to global uncertainties. That said, the rest of the emerging markets pack has suffered even more. India has stood out that way. Still, FII flows have been very muted in the current phase,” said Hemant Kanawala, Kotak Life Insurance.

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“As long as the uncertainty over the future course of the US Fed rate action remains, we do not expect FII flow to resume strongly, but once that event gets over in December, there is a possibility that India would start receiving fresh flows from January onwards,” Kanawala said.

Only in 2011 and 2008 did the domestic market witnessed FPI outflows in the period mentioned. (See table)


Data showed foreign investors have, on an average, infused Rs 6,702 crore in domestic equities in the month of December in last 12 years. Only in 2006, did the market witness outflows.

Calendar 2012 has been the best year so far in terms of FPI inflows to equity. During the year, FPIs bought stocks worth a whopping Rs 1,28,359.80 crore, data suggested.

Experts said while there could be some kneejerk reaction to the US Fed rate hike, globally liquidity would not be impacted majorly when it happens.

"A reversal of the Fed stance does not mean that liquidity will be sucked out of the system overnight. My sense is, considering the soft economic growth globally and strong disinflationary forces all around, central banks across the globe will ensure that the liquidity scenario remains comfortable,” Saibal Ghosh, Chief Investment Officer, AEGON Religare Life Insurance, said in an interview with ET.com.

FII investments in BSE500 companies came down slightly to 23.3 per cent at the end of September quarter from an all-time high level of 23.9 per cent at the end of June quarter.

“India’s overweight rating in GEM funds, though down from the all-time peak reached in January, continues to be very high and it actually inched up during the September quarter due to changes in the index and also India’s relative outperformance. The good news is that backed by strong inflows, domestic MFs ( mutual funds) have continued to increase their ownership of Indian equities to an all-time high level of 4.6 per cent, thus supporting the market,” foreign brokerage Bofa-ML said in a research note.