Market watch: FPIs sell equity while markets soar

Fiscal 2018 was an eventful year on the bourses. Despite regular bouts of volatility, which saw key indices swinging both ways, the closing values of S&P BSE Sensex and Nifty 50 grew 10.2% and 9.5% each, on absolute basis, between April 3, 2017 and March 28, 2018.

The S&P BSE 500 and Nifty 500 also recorded an 11% and 10.7% absolute rise, while the S&P BSE Midcap and Smallcap saw 12.5% and 16.2% absolute rise in the fiscal ended March 2018.

FPIs, during FY2018, were net buyers of equity to the tune of Rs 42,561.6 crore, an annual 9.5% lower than Rs 47,020.2 crore they bought on net basis at the end of FY2017. In dollar terms, FPIs’ net equity investments of $5.07 billion, in FY2018, were 29.3% lower than $7.17 billion invested in FY2017.

But, that is the bigger picture. What is more important to note is that FPI’s net activities in the primary market have supported the Rs 42,561.6 crore of total investments. At Rs 51,581.56 crore ($7.99 billion), net investments in primary market were 351.8% higher (367% higher in dollar terms) in FY2018, compared to Rs 11,417.55 crore ($1.71 billion) they invested in FY2017.

The booming primary capital markets made FY2018 a memorable year, with record mobilisations worth Rs 1.77 lakh crore, which included initial public offerings (IPOs) worth Rs 84,357 crore according to data compiled by New Delhi based PRIME Database.

According to Pranav Haldea, Managing Director, PRIME Database, FY2018 was the best year ever for the IPO market by far, the previous high being in FY2008 when Rs. 41,323 crore was raised, less than half of the amount raised in FY2018.

And primary market boom is the reason why FPIs investment in the fiscal looks less perplexing. While FPIs were net buyers of equity worth Rs 35,602.65 crore ($5.46 billion) through stock exchanges in FY2017, the number this year is negative. FPIs are net sellers of equity worth Rs 9,019.97 crore ($ 2.91 billion) through stock exchanges.

In terms of the bigger picture including debt investments, FPIs were net buyers of debt worth Rs 1.19 lakh crore ($ 18.5 billion) in FY2018, compared to being net sellers of debt worth Rs 6,751.65 ($ 866.48 million) in FY2017.

Clearly, the buoyancy in the equity markets has helped FPIs book profits this fiscal.