An analysis shows that foreign fund ownership in domestic equities fell to pre-Covid lows and hit a multi-year low of 19.5 per cent in NSE 500 companies in March this year.
FPI ownership stood at 19.5 per cent in March 2022, the lowest in the last three years, when it was 19.3 per cent in March 2019, the pre-covid period.
According to a report by Wall Street brokerage Bank of America Securities India, their ownership stood at 21.2 per cent on a year-on-year basis, the second highest on record in March 2021.
Foreign fund ownership in domestic equities stood at 18.6 percent in December 2017, the lowest in five years, and the peak was in December 2021, when they owned 21.4 percent of domestic equities.
Importantly, share losses of foreign portfolio investors (FPIs) have been corrected by rapidly increasing ownership of shares by domestic funds, which pumped in $6 billion in March and $14.6 billion in 2021-22, the report said. Having said.
At $619 billion of FPI ownership, the highest incremental allocation was to energy stocks with 16.2 per cent, followed by IT at 14.8 per cent and communications services at 4 per cent.
In the overall allocation, Financial still leads the chart with 31.4 per cent followed by Discretionary (9 per cent).
March alone witnessed the sixth consecutive month of FPI outflows, the most severe since March 2020 (post pandemic scare), due to continued geopolitical risks, increased inflation due to supply side issues, rising commodity costs , stated in the report.
Even amid the pullout, emerging market funds are steadily increasing their allocation to India (19 per cent in March versus 13.3 per cent in January 2021), while China (34.6 per cent in March versus 42.2 per cent in January 2021). Percent).
Similarly, MSCI India’s valuation premium for emerging markets is still at 38 per cent and 10 per cent above the respective long-term average for the world, but in the longer term, this premium is justified as India ranks better among emerging markets. , stated in the report.
Apart from India, other emerging markets including Taiwan, Korea and the Philippines have also seen massive outflows so far this fiscal.
The record fall was mainly due to massive outflows of $5.4 billion in March and $15.7 billion in 2021-22. Such a huge pullout came after a $23 billion pump in 2020 and $3.7 billion in 2021.
Wall Street brokerages expect the market to trade sideways in the near term, given volume growth in several sectors and rising inflation affecting margins.
The brokerage has not offered any hike in its December Nifty target of 17,000 mark but said it prefers financial, industrial, cyclical and utilities among select autos and healthcare among defensive.