Even as the foreign portfolio investors stayed away from the secondary markets during FY22, they maintained their investment interest in primary market during the November-December period when big-ticket initial public offerings (IPOs) hit the capital markets, said the RBI annual report.
Overseas investors, who have been offloading Indian shares at a record pace, remained net sellers for eight out of 12 months in FY22. During the year, they withdrew a whopping Rs 1.3 trillion, against a net inflow of Rs 2.8 trillion in the previous year. Yet, the domestic markets fared the best among major emerging markets, as foreign sell-off was strongly absorbed by mutual funds and retail investors. Mutual funds have bought equities to the tune of Rs 1.7 trillion in FY22.
Of the net resources mobilised by mutual funds of Rs 2.5 trillion during 2021-22, systematic investment plan (SIP) contributions witnessed a healthy growth – an indication of rising retail participation and financialisation of household savings,” said the RBI annual report.
While the Sensex yielded a return of 18.3%, MSCI EM declined as much as 13.3%. South Africa and Indonesia returned 12.5% and 18.1%, respectively, during the year. “A large chunk of flows was diverted by FPIs from the secondary to the primary market during the November-December period when big-ticket initial public offering (IPO) issues hit the capital market,” said the report.
The primary markets mobilisation surged 26.1% to Rs 1.39 trillion in FY22. That compares with Rs 1.1 trillion raised in the previous fiscal. According to the annual report, this includes all the primary market activities, including IPOs, follow-on public offerings (FPOs) and rights issues. This also includes all issues by main-board and SME players.
However, fund-raising through rights and qualified institutional placement recorded a decline in FY22. While the resource mobilisation through rights issues decreased to Rs 26,327 crore during 2021-22 compared with last year’s Rs 64,059 crore, funds mobilisation through preferential allotment and qualified institutional placement (QIP) slipped below Rs 1 trillion to Rs 92,135 crore. In FY21, Rs 1.19 trillion was raised through preferential and QIP routes.
The persistent sell-off by FPIs also weekend the Indian rupee in FY22. “FPI outflows from the domestic equity markets and a broad-based rally in commodity prices also impacted the rupee during the quarter,” observed the report.