PremiumAccording to a Mint analysis of BSE 500 companies, FPIs reduced their stakes in 53% companies sequentially in Q3FY22, up from around 46% in Q1 and Q2. Even the most favoured blue-chip stocks faced the heat as FPIs trimmed their holdings in nearly 80% of Sensex companies.
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MUMBAI : Foreign portfolio investors (FPIs) seem to have pressed the panic button after six quarters to turn net sellers in the December quarter, with the latest shareholding data of companies revealing these strains.
According to a Mint analysis of BSE 500 companies, FPIs reduced their stakes in 53% companies sequentially in Q3FY22, up from around 46% in Q1 and Q2. Even the most favoured blue-chip stocks faced the heat as FPIs trimmed their holdings in nearly 80% of Sensex companies.
The selling was primarily on account of profit-booking and US Federal Reserve’s hawkish view, and is likely to continue in the secondary market in the near term, especially in richly-valued stocks, Piyush Nagda, head of investment products at Prabhudas Lilladher, said. “The upcoming budget and LIC IPO could do a balancing act in moderating the selling."
However, FPIs cherry-picked 86 stocks, consistently raising their stakes in them, over the last four quarters. While the most favoured stocks were IRB Infrastructure Developers and Saregama India, Just Dial and Poonawalla Fincorp, among others, fell out of favour.
That apart, FPIs also turned bullish on sectors such as capital goods, consumer durables, retail, and hotels and restaurants during the period. This could however be a mere reflection of the record investments in companies through the primary market route at sectoral levels, experts said.
A long-term analysis of the companies since 2015, based on a common sample of 370 firms, showed a marginal dip in FPI shareholdings in the October-December 2021 period: from 11.46% in July-September to 11.43%, just a tad higher than a six-year low share of 11.4% in April-June 2020.
On the contrary, mutual funds have raised their holdings, albeit marginally, from 5.79% in Q2 to 5.84% in Q3FY22. For domestic funds, huge contributions from systematic investment plans and strong new fund offer flows resulted in massive inflows that were deployed. “This has not only raised MF stakes in many stocks but has also helped in absorbing FPI selling," Nagda said. “When you get record inflows like this in a bull market, taking huge cash calls for fund managers is always challenging due to the fear of a potential under-performance."
As rising price pressure rings alarm bells for policymakers, globally, with the US Fed inching closer to a rate hike, FPI fund flows are expected to moderate in the near-to-medium term. They have pulled out ₹22,722 crore from the capital markets in the year so far. That said, investors need to brace up for a consolidation ahead, as markets have corrected 8% from its peak in October.
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