Economic Survey 2023: Total assets under FPIs grow despite huge outflows

Moneycontrol looks into major sectors that are poised to generate employment as per the Economic Survey 2023.

Total assets under custody of Foreign Portfolio Investors (FPIs) increased by 3.4 percent owing to the strong macroeconomic fundamentals of the Indian economy and improvement in market risk appetite from time to time, according to the Economic Survey 2022-23 released by the Finance Ministry on January 31.

Despite the uncertain macro environment considering the inflation and geopolitical concerns, the total assets under custody of FPIs increased to Rs 54.0 lakh crore at the end of November 2022 as compared to Rs 52.2 lakh crore at the end of November 2021.

Ironically, this increase comes at a time when Indian equities are witnessing huge FPI outflows.

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During FY23, if we look at the overall net investments by FPIs, the market saw an FPI outflow of Rs 16,153 crore at the end of December 2022 as against an outflow of Rs 5,578 crore during FY22 at the end of December 2021, as per the survey. Both segments-- equity and debt--witnessed net FPI outflows, the survey stated.

In 2022, FPIs sold $17.21 billion in local equities and this selling by FPIs was even higher than what the market witnessed in the 2008 economic crises, Bloomberg data showed.

FPIs had started pulling out from the Indian markets as rising inflation, recessionary fear and hike in interest rates put a dampener on investor sentiment.

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Moreover, investors were also sitting on gains from Indian stocks that could be realised to offset losses elsewhere.

So far this year, FPIs sold $2.39 billion in equities which is likely to be an indicator of caution creeping in ahead of the Union Budget 2023-24.

Another indicator of nervousness ahead of the Budget can be visible from the decline in benchmark indices. In the past one month, the Nifty 50 has fallen nearly three percent and the Sensex is down more than two percent.

Meanwhile, investments by Domestic Institutional Investors (DIIs) acted as a countervailing force against FPI outflows during recent years, rendering the Indian equity market relatively less susceptible to large-scale corrections.