Foreign portfolio investors shed half of the top 500 stocks in Q3

According to Mint analysis of BSE 500 companies, FPIs reduced their stake in companies to 53% in Q3FY22, respectively, from around 46% in Q1 and Q2. Even the most preferred blue-chip stocks faced heat as FPIs reduced their stake in nearly 80% of Sensex companies.

Piyush Nagda, head of investment products at Prabhudas Lilladher, said the sell-off was mainly due to profit-booking and the US Federal Reserve’s enthusiasm, and is likely to continue in the secondary market in the near term, especially in richly priced stocks. Piyush Nagda said. , “The upcoming budget and LIC may do a balancing act in controlling the IPO sale.”

However, FPIs have consistently picked up 86 stocks in the last four quarters, increasing their stake in them. While the most preferred stocks were IRB Infrastructure Developers and Saregama India, Just Dial and Poonawalla Fincorp, among others, fell out of favour.

In addition, FPIs also grew sharply during this period in sectors such as capital goods, consumer durables, retail, and hotels and restaurants. However, this could be a mere reflection of record investments in companies at the regional level through the primary market route, experts said.

A long-term analysis of companies since 2015, based on a typical sample of 370 firms, showed a slight decline in FPI shareholding in the October-December 2021 period: from 11.46% in July-September to 11.43%, just slightly higher in April – compared to a six-year low of 11.4% in June 2020.

In contrast, mutual funds have marginally increased their holdings, from 5.79% in Q2 to 5.84% in Q3FY22. For domestic funds, massive contributions from systematic investment plans and strong new fund offer flows resulted in massive inflows that were deployed. Nagda said, “This has not only increased MF stake in many stocks, but has also helped in absorbing the sales of FPIs. When you get record inflows like this in a bull market, it is huge for fund managers.” It is always challenging to take cash calls. There is a fear of possible under-performance.”

Globally, as rising price pressures sound alarm bells for policymakers, FPI fund flows are expected to moderate in the near-to-medium term, with the US Fed approaching a rate hike. they have taken out 22,722 crore from the capital market so far in the year. That said, investors need to be prepared for a consolidation ahead, as markets have corrected 8% from their peak in October.