FPI in­vest­ments at 7-year peak

Business Standard - - THE SMART INVESTOR - ASH­LEY COUTINHO

For­eign port­fo­lio in­vestors (FPIs) have pumped in nearly $10 bil­lion (~65,400 crore) in the pri­mary share mar­ket, high­est in seven years.

How­ever, it’s a dif­fer­ent story in the sec­ondary mar­ket, with FPIs of­fload­ing stocks worth $3.4 bil­lion. In ef­fect, their to­tal net in­flow of $6 bil­lion (~39,200 crore) this year is largely a re­sult of their in­vest­ment in the pri­mary mar­ket.

The pri­mary mar­ket has seen its high­est is­suance ever, at $20 bil­lion till Oc­to­ber, shows data from Edel­weiss Al­ter­na­tive Re­search.

Also, since the be­gin­ning of calendar year 2015, FPIs have sold $7.73 bil­lion in the sec­ondary mar­ket and de­ployed $19.9 bil­lion via the pri­mary mar­ket. “The pro­vi­sional sec­ondary mar­ket flow num­bers have over­shad­owed the de­ploy­ment done by FPIs in the In­dian eq­uity mar­ket. The em­pha­sis on FPIs’ con­tin­u­ously sell­ing is, in our view, a case of mak­ing a moun­tain out of a mole­hill,” goes a note from Edel­weiss.

The BSE IPO (ini­tial pub­lic of­fer­ing of eq­uity) in­dex has jumped about 40 per cent this year, higher than the 24 per cent gain by the bench­mark 30-share Sen­sex.

The re­cent HDFC Stan­dard Life is­sue saw par­tic­i­pa­tion from a lit­tle more than two dozen for­eign funds. These in­cluded Fidelity, First State, Kuwait In­vest­ment Au­thor­ity, the Govern­ment of Sin­ga­pore and Abu Dhabi In­vest­ment Au­thor­ity.

New funds, such as those of the Univer­sity of Cal­i­for­nia, Carnegie Fund and San­ford C Bern­stein Fund, have also put money in re­cent IPOs.

Fund rais­ing through the pri­mary mar­ket has amounted to ~1.5 lakh crore this calendar year, with ~65,000 crore be­ing raised through IPOs and about ~48,000 crore raised through Qual­i­fied In­sti­tu­tional Place­ment, data from Prime Data­base as on Novem­ber 14 shows.

In­ter­est­ingly, do­mes­tic in­sti­tu­tional in­vestors (DIIs), ex­clud­ing mu­tual funds (MFs), have also off­loaded shares this year, a net $3.5 bil­lion. DIIs in­clude in­sur­ers, one of the largest driv­ers of In­dian stocks be­side for­eign in­sti­tu­tional play­ers. In the past, govern­ment-owned Life In­sur­ance Cor­po­ra­tion, the coun­try's largest in­surer, has helped prop the mar­ket against steep falls.

MFs, on the other hand, have in­vested about $15 bil­lion in the sec­ondary mar­ket this year. This com­pares with $7 bil­lion and $11 bil­lion of in­vest­ment in 2016 and 2015. With the eq­uity cor­pus in ex­cess of ~7 lakh crore, MFs are in­creas­ingly dic­tat­ing the mar­ket di­rec­tion. They put in about ~1.5 lakh crore in the past two years, more than twice the ~66,000 crore put in by FPIs, his­tor­i­cally the dom­i­nant price set­ters.

Ac­cord­ing to a Mor­gan Stan­ley re­port, in­sti­tu­tional own­er­ship stood at 40.7 per cent at the end of June 2017, the high­est level to date. Pro­moter hold­ing was 45.6 per cent, low­est since March 2001.

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