The foreign institutional investors (FIIs) ownership in NSE 500 companies have dropped to a three-year low in March due to continued geopolitical risks, sustained elevated inflation coupled with supply-side issues, and soaring commodity costs. A BofA Securities report highlighted that the outflow was more severe than in March 2020 when the Covid-19 lockdown hit the nation.
As per the BofA data, FII’s ownership in NSE 500 fell to 19.5% in March this year. It data revealed that FII’s in March was at -$5.4 billion – the most severe since March 2020.
However, in April, the pace of outflow has slowed down and stood at (-$1.2 billion) so far this month hinting toward a potential turnaround in the FIIs going forward.
So far in 2022, the outflows stood at $15.7 billion.
On the contrary, BofA data stated that Domestic institutional investors (DIIs) remained positive with monthly flows clocking at a new all-time high of $6 billion rising by 19% compared to the previous month. DIIs also touched a milestone of crossing over $ 5 billion for the second month in a row.
In the current year 2022, the overall DIIs pumped in $14.6 billion in the Indian markets.
The BofA report highlighted that the assets under management (AUM) of FPIs were to the tune of $ 619 billion as of March 2022, with the highest allocation recorded in energy (16.2%), IT (14.8%), and communication services (4%). However, financials and discretionary were top laggards.
As per the BofA data, so far this year, India recorded the highest outflows from foreign investors after Taiwan. On the other hand, Brazil witnessed buying sentiments with an inflow of $12.5 billion.
In terms of emerging market funds, the BofA report stated that India witnessed a rise in allocation in comparison to China which saw a decline in a year. As of March 2022, exposure to India comes at 19% against 13.3% in January 2021, meanwhile, exposure in China is recorded at 34.6% in March against 42.2% in January last year.
However, BofA expects a potential reversal in the outflows from the equity markets. Thereby, it believes that the FIIs ownership levels may pick momentum in the coming months.
Amish Shah, head of India research at BofA Securities in the report said ‘year-end Nifty target of 17,000 offers no upside.’ However, he prefers financials, industrials, select autos among cyclical and utilities, and healthcare among defensives.
BofA report also highlighted that Nifty50 soared 4% in March.
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