Long-term FPIs have been raising India bets, shows data

Sovereign and pension fund have seen a rise in their share of overall FPI assets

A segment of foreign portfolio investors (FPIs) have been stepping up their India investments even as overall selling hit a record high.

Investments by sovereign wealth funds and pension funds are up 59-80 per cent since the pandemic began shows an analysis of depository data. Their assets under custody remain steady even as markets fall and other investors head for the exit.

Sovereign wealth funds look to invest a country’s wealth for future contingencies. Some of the largest ones in the world are from oil-producing countries like Norway. Pension funds look to set aside capital for the retirement of employees. Many developed countries have large pension funds such as Calpers in the United States of America. These two categories of funds typically invest for a longer time horizon in line with their objectives. They are seen to be steadier sources of capital than other foreign investors who may have a shorter investment horizon.

 Sovereign wealth funds had total assets under custody of Rs 1.8 trillion as of December 2019. This rose to Rs 2.99 trillion as of September 2021. The S&P Sensex, whose movements are considered broadly indicative of how the markets are doing, hit an all-time high of 62,245.43 in October. It has since fallen 12.4 per cent to close at 54,529.91 on Thursday. Some of this was driven by Rs 87,765 crore in overall FPI selling, the highest ever so far in a financial year as of the latest available data.  The share of sovereign wealth funds in overall FPI investments remained steady at around 6 per cent through December and January.

Pension funds have a larger exposure to Indian equities than sovereign wealth funds. Their assets rose from Rs 2.4 trillion in December 2019 to Rs 4.3 trillion as of September 2021, just before the market peaked. The total pension fund equity investment was Rs 4.2 trillion as of January-end. It accounted for 8.84 per cent of the overall FPI investments in the country.

Pension funds have seen their assets rise 79.5 per cent since December 2019, before the pandemic took hold in India. Sovereign wealth fund assets are up 59.2 per cent in the same period. The S&P BSE Sensex was up 40.63 per cent in the same period.

Domestic investors too have been buying into the fall thus far, noted a February 24 ICICI Securities Mutual Fund Review report authored by research analyst Sachin Jain

“Rising global risk aversion on the back of rising inflation/interest rates and geopolitical tensions between Ukraine and Russia led to a sharp fall in global equity markets since the start of calendar year 2022... Domestic investors particularly mutual funds have been major buyers during the same time absorbing the FPI sell-off,” it said.

It noted that equity mutual funds saw the highest ever inflows (excluding new fund offers) of Rs 14,900 crore in January 2022. Inflows through systematic investment plans (SIPs) was Rs 11,500 crore noted the report compared to Rs 11,300 crore in the previous month.