So far in the current calendar year 2019, foreign institutional investors as per the data from NSDL infused as much as Rs. 99,966 crore in Indian equities. This is the highest inflow since 2013, when foreign investors pumped in a total of Rs. 1.1 lakh crore into equities.
However the first month of the CY19 saw huge foreign fund outflow to the tune of Rs. 4262 crore and thereafter inflows began to pick up in February and in the subsequent five months time, they invested Rs. 82,910 crore.
In the second half of the CY19, there was seen a sharp decline in FII inflows as corporate earnings growth remained muted, GDP growth sank to 6-year low and on account of subdued consumer demand. And consequently, inflows during the second half of the ongoing year i.e. from July 2019 came in at Rs. 21,318 crore versus Rs. 78,648 crore recorded during the January-June period. Only 3 months including January, July and August saw foreign fund outflow.
The factors deterring FIIs confidence in India leading to 2-straight months of outflow i.e. during July and August which saw selling to the tune of Rs 12,419 crore and Rs 17,592 crore, respectively have been an increase in the tax on super-rich or foreign portfolio investors (FPIs), US-China trade war, concerns around economic growth slowdown and mixed to poor corporate earnings season.
Also, buoyed by strong foreign fund inflow, Indian stock markets several times during the year recorded new highs, with Sensex and Nifty up by 15% and 12%, respectively in 2019. On heavy FPI inflow to the tune of Rs. 51,252 crore, the Sensex and Nifty surged 28% and 29% in 2017. And analysts expect the RBI to continue to cut interest rates even amid spiking inflation levels in order to boost sluggish growth in order for the FII inflows to sustain.
Within the Nifty pack, ownership of FIIs has increased by the highest quantum in Power Grid and Bharti Airtel. In the BFSI segment, FII ownership remained intact in stocks such as Bajaj Finance and Kotak Bank. Meanwhile, FII holding in Bajaj Finserv increased considerably, as per a report from ICICI Direct.
Also, in some of the FMCG companies including HUL and Nestle there was been witnessed no dilution in FII stake while the ownership of FIIs increased by a significant proportion in Asian Paints. In the meantime, unlike other stocks from the pharma pack, Dr. Reddy's saw a gradual rise in FII stake.