FPI investments at 7-year peak

Foreign portfolio investors (FPIs) have pumped in nearly $10 billion (Rs 65,400 crore) in the primary share market, highest in seven years. 

However, it’s a different story in the secondary market, with FPIs offloading stocks worth $3.4 billion. In effect, their total net inflow of $6 billion (Rs 39,200 crore) this year is largely a result of their investment in the primary market. 

The primary market has seen its highest issuance ever, at $20 billion till October, shows data from Edelweiss Alternative Research. 

Also, since the beginning of calendar year 2015, FPIs have sold $7.73 billion in the secondary market and deployed $19.9 billion via the primary market. “The provisional secondary market flow numbers have overshadowed the deployment done by FPIs in the Indian equity market. The emphasis on FPIs’ continuously selling is, in our view, a case of making a mountain out of a molehill,” goes a note from Edelweiss. 

The BSE IPO (initial public offering of equity) index has jumped about 40 per cent this year, higher than the 24 per cent gain by the benchmark 30-share Sensex. 

The recent HDFC Standard Life issue saw participation from a little more than two dozen foreign funds. These included Fidelity, First State, Kuwait Investment Authority, the Government of Singapore and Abu Dhabi Investment Authority. 

New funds, such as those of the University of California, Carnegie Fund and Sanford C Bernstein Fund, have also put money in recent IPOs. 

 

Fund raising through the primary market has amounted to Rs 1.5 lakh crore this calendar year, with Rs 65,000 crore being raised through IPOs and about Rs 48,000 crore raised through Qualified Institutional Placement, data from Prime Database as on November 14 shows.

Interestingly, domestic institutional investors (DIIs), excluding mutual funds (MFs), have also offloaded shares this year, a net $3.5 billion. DIIs include insurers, one of the largest drivers of Indian stocks beside foreign institutional players. In the past, government-owned Life Insurance Corporation, the country's largest insurer, has helped prop the market against steep falls.

MFs, on the other hand, have invested about $15 billion in the secondary market this year. This compares with $7 billion and $11 billion of investment in 2016 and 2015. With the equity corpus in excess of Rs 7 lakh crore, MFs are increasingly dictating the market direction. They put in about Rs 1.5 lakh crore in the past two years, more than twice the Rs 66,000 crore put in by FPIs, historically the dominant price setters. 

According to a Morgan Stanley report, institutional ownership stood at 40.7 per cent at the end of June 2017, the highest level to date. Promoter holding was 45.6 per cent, lowest since March 2001.