FPIs load up on realty stocks in the first half of December, total inflows edge up to ₹9,017 crore

FPIs load up on realty stocks in the first half of December, total inflows edge up to ₹9,017 crore
Foreign investors are loading up on the realty sectorCanva
  • Foreign portfolio investors turned bullish on India’s realty sector in the first fortnight of December.
  • The realty sector witnessed inflows of ₹3,150 crore, or over 34% of the total ₹9,017 crore net equity investments by FPIs in this period.
  • Financial services sector, which was the FPI favourite in November, saw a marginal outflow of ₹209 crore.
Foreign capital inflows have been focused on select sectors in the second half of 2022 following a heavy selling witnessed up until June this year. While financial services, FMCG and healthcare have been the top favourite sectors for equity foreign portfolio investments (FPIs) so far, the real estate sector has caught their fancy in the first fortnight of December.

The realty sector received the highest FPI inflows of ₹3,150 crore, or over a third of the total flows of ₹9,017 crore, in the first half of December. Consumer services and FMCG came in next with inflows of ₹2,676 crore and ₹2,649 crore, respectively.

FPIs load up on realty stocks in the first half of December, total inflows edge up to ₹9,017 crore
FPI flows in the first half of DecemberBusiness Insider India

In the second half of 2022, FPIs have invested ₹93,816 crore in Indian equities – the financial services sector was the top sector in this period with ₹21,450 crore inflows, followed by FMCG at ₹16,440 crore, and healthcare at ₹14,017 crore.

Only three sectors have seen net outflows in this period – textiles at ₹243 crore outflows; oil, gas & consumable fuels at ₹9,285 crore, and IT at ₹9,977 crore.

In 2022 so far, FPIs have pulled out ₹1.22 lakh crore from Indian equities.

Realty rules, financial services see outflows in first half of December

Real estate demand has remained strong through the pandemic years. What started with non-resident Indians buying homes in India in 2020 has now become a mainstream trend with a lot more Indians buying real estate in smaller towns too.

The realty sector has benefited from strong demand trends in the commercial space too – where absorption during Q2 FY23 rose 59% year-on-year to 17.6 million square feet, according to data from Kotak Institutional Equities. With the opening up of the economy, demand for commercial spaces has also shown an uptick. Another positive for the sector is the decline in the average debt cost of the top eight listed realtors by 150 basis points to 8.14%, the lowest since the pandemic.

On the other hand, the financial services sector, which was the top purchase of FPIs in November, witnessed outflows of ₹209 crore during the first fifteen days of December. The sector had drawn ₹14,205 crore of the total investments of ₹36,238 crore in November.

The consumer services sector continued to draw FPIs in December too. The sector had seen inflows of ₹2,837 crore in November. It has emerged as the second most-preferred sector in the first half of December as well with inflows of ₹2,676 crore.

Oil & gas, IT sectors see a sell-off

On the other hand, while the oil, gas and consumable fuels sector was one of the top five FPI buys in November at ₹2,774 crore, it witnessed a sell-off in December, with outflows of ₹2,230 crore.

The IT sector, which saw inflows of ₹3,859 crore and was amongst the top five sectors in November, saw FPIs pulling out money in the first half of December.

This comes after hawkish commentary from the US Fed spooked investors and saw the tech-heavy Nasdaq Composite decline 5.73% during the period.

In terms of assets under custody, financial services edged up with a share of 33% of the total investments worth ₹49.3 lakh crore in the equity segment.

The oil, gas & consumable fuels, and IT sectors witnessed a decline in their share of assets under custody. FMCG, and auto sectors maintained their respective shares in the first half of December.

FPIs load up on realty stocks in the first half of December, total inflows edge up to ₹9,017 crore
FPI assets under custodyBusiness Insider India

Despite the FPI inflows in the first half of December, the benchmark Nifty50 index slipped 1.83%, while Sensex declined 2.06% during the period.

Going forward, analysts expect FPI flows in India to remain muted in FY24 at $10 billion. For context, FPIs have pulled out $18.2 billion in 2022 so far across equity and debt segments.

“Emerging markets could find some favour as inflation peaks out globally and markets start factoring in rate cuts in developed markets. However, with China expected to normalise from lockdowns over the next few months, reallocation of capital flows to China away from other emerging markets is expected,” said a report by Kotak Economic Research.

However, the strong resilience demonstrated by domestic investors could support valuations of Indian markets, according to Credit Suisse. In 2022 so far, while foreign institutional investors have pulled out ₹2.72 lakh crore, domestic institutional investors have pumped in ₹2.63 lakh crore. According to analysts at Kotak Securities, that trend is likely to continue in 2023 as well.


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