FPIs stock holding value soars to $630 bn as of Aug: Report

Mumbai: Even as foreign funds are getting jittery about the domestic market due to the steeply higher valuation amid the massive market rally, their holding in the domestic equities rose to $630 billion as of August, according to a American brokerage report. As of June this year, the value of FII investment was only $592 billion, which means that as the market rallied frenetically, their holding value jumped by $38 billion even though their net incremental investment was almost nil between this period.

The market rallied the most in August hitting many new records driven mostly by the retail investors and domestic funds, whose investments are at historic high now. The market scaled new highs with the Sensex on Thursday sniffing at the 60,000 mount and the Nifty at around 17,850.

The foreign investments, which had scaled to a record high of over $37 billion in FY21, have touched $7.2 billion so far this fiscal, the second highest among all EMs after Brazil’s $9 billion. Foreign Portfolio Investors (FPIs) have turned positive in August with a margin $281 million net inflows as against $1.5 billion outflows in July, according to Bank of America India Securities.

At $7.2 billion year-to-date inflows into the domestic equities, this this is the second highest among all emerging markets (EMs) as FII flows, as most EMs continued to see outflows in August with notably South Korea losing $26.4 billion and Taiwan $16.2 billion, the report said.

“The value of FIIs’ (foreign institutional investment) overall equity exposure stands at $630 billion as of the end of August after their net investment turned positive at a whisker of $281 million after the heavy selloff in July to the tune of $1.5 billion,” BofA said in a report without giving a comparative number or the percentage of increase.

However a June BofA report had pegged the value at $592 billion, marginally down from $596 billion in the previous month of May. The overall value erosion of about $4 billion between May and June is more due to the valuation loss in many stocks.

An IIFL Research report had in July said the $592 billion valuation was against the net FII investment of just $206 billion into domestic equities since FY2000.

Of the $630 billion assets under management, major FII holdings are into financials and information technology to the tune of 34.9 per cent each, energy at 13.5 per cent, utilities (2.7 per cent), industrials (5.5 per cent), and discretionary (9 per cent).

From a sectoral perspective, FIIs continue to maintain overweight on energy (5.9 per cent), financials (4.5 per cent), and discretionary (1.2 per cent), and are underweight on materials (-9.9 per cent), industrials (-1.7 per cent) and healthcare (-0.6 per cent).

Meanwhile, the domestic funds pumped in a robust $3.9 billion after a record $5.6 billion in July, which was the highest in two years.

Meanwhile, the Wall Street brokerage reiterated its warning of caution and deep correction in the market given the massive rally. “With valuations peaking, we expect a tactical market correction and our Nifty target is 15,000, which implies a full 9 per cent potential downside.”