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FII ownership of NSE 500 stocks at 3-year low: BofA Securities

Given the multiple headwinds, BofA Securities expects markets to be sideways the near-term given inflation impacting volume growth and margins across several sectors

Topics
FII flows | FII outflows | FII

Puneet Wadhwa  |  New Delhi 

nse, National Stock Exchange
National Stock Exchange

Foreign institutional investor’s (FII’s) ownership of NSE 500 stocks hit a three-year low of 19.5 per cent, suggested a note by Securities. In terms of flows into Indian equities, March 2022, Securities' note said, was the sixth consecutive month of outflows (-$5.4 billion, most severe since March 2020) on the back of continued geopolitical risks, sustained elevated inflation led by supply-side issues, rising commodity costs.

ALSO READ: FIIs may remain on sidelines for some time: Julius Baer's Ashish Gumashta

On a month-till date (MTD) basis, April 2022, however, saw the pace of outflow slow (-$1.2 billion), indicating potential stemming/reversal of outflows.

On a year-to-date (YTD) basis, calendar year 2022 outflows stood at $15.7 billion.

Domestic institutional investors (DIIs), on the other hand, remained upbeat on the road ahead for the with monthly flows touching new highs at $6 billion (+19 per cent MoM), crossing $5 billion mark for the second consecutive month (YTD +$14.6 billion up to March 2022), Securities said.

Given the multiple headwinds, BofA Securities expects to be sideways the near-term given inflation impacting volume growth and margins across several sectors.

ALSO READ: FII stock ownership plunges to 19.9%, value down to $582 bn YTD

“Our year-end Nifty target of 17,000 offers no upside; we prefer financials, industrials, select autos among cyclicals and utilities and healthcare among defensives,” wrote Amish Shah, head of India research at BofA Securities in a recent note.

NSE 500 stocks :: FII ownership

NSE 500 stocks :: ownership

Thus far in 2022, India saw heavy outflows second only to Taiwan, while Brazil led inflows (+$12.5 billion).

“While emerging market (EM) funds have steadily increased allocation to India (19 per cent in Mar-22 vs 13.3 per cent in Jan-21) versus China (34.6 per cent in Mar-22 vs 42.2 per cent in Jan-21), India's overweight position is currently near multi-year lows, with outflows potentially stemming / reversing, this could turn around,” Shah said.

ALSO READ: Don't see significant slowdown in retail flows: Tata AIA Life's Patil

In terms of sectors, FII inflows were largely skewed in favor of Energy (+$871 million), Utilities (+$39 million) and Healthcare (+$35 million). “Financials (-$3.5 billion), Industrials (-$724 million), Discretionary (-$1.3 billion) saw highest outflows since March 2017. Outflows in IT (-$80 million) slowed significantly, while Materials saw heavy outflows (-$520 million),” the BofA Securities note said.

ALSO READ: Foreign investors likely to return to Indian equities soon: Chris Wood

Within the NSE500 universe, domestic mutual funds largely remain overweight in financials, Healthcare, Industrials and underweight on Energy, information technology (IT), Staples, Discretionary, and Materials, the brokerage said.

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Twitter: @Pun_ditry

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First Published: Fri, April 22 2022. 12:04 IST
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