Foreign institutional investors (FIIs) ownership in NSE 500 companies fell to a three-year low in March due to continued geopolitical risks, continued high inflation coupled with supply-side issues and rising commodity costs. A BofA Securities report said the outflow was more severe than in March 2020 when the Covid-19 lockdown hit the country.
According to BofA data, foreign institutional investorsOwnership in the NSE 500 fell to 19.5% in March this year. Its data showed that FIIs in March – $5.4 billion – were the most severe since March 2020.
However, in April, the pace of outflows has slowed down and so far this month has been (- $1.2 billion), pointing to a possible turn in FII going forward.
So far in 2022, the outflow was $15.7 billion.
In contrast, BofA data said domestic institutional investors (DIIs) remained positive with monthly inflows hitting a new all-time high of $6 billion, up 19% over the previous month. DII also achieved the milestone of over $5 billion for the second consecutive month.
In the current year 2022, total DIIs invested $14.6 billion in the Indian markets.
As of March 2022, the assets under management (AUM) of FPIs stood at $619 billion, with energy (16.2%), IT (14.8%), and communication services recording the highest allocations, the BofA report said. , However, the financial and discretionary tops were lagging.
According to BofA data, so far this year, India has recorded the highest outflow from foreign investors after Taiwan. Brazil, on the other hand, witnessed buying sentiment with an inflow of $12.5 billion.
In the context of emerging market funds, the BofA report said India saw an increase in allocation compared to China, which saw a decline in a year. As of March 2022, exposure in India comes in at 19% against 13.3% in January 2021, meanwhile, exposure to China was recorded at 34.6% in March, up from 42.2% in January last year.
However, BofA expects a possible reversal in outflows from the equity markets. Thus, it believes that the level of FII ownership may pick up in the coming months.
Amish Shah, Head of India Research, BofA Securities, said in the report, “The Nifty target of 17,000 at the end of the year is not an upside.” However, he prefers auto and healthcare among defensive ones, selectively among financial, industrial, cyclical and utilities.
The BofA report also pointed out that the Nifty 50 rose 4% in March.