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Foreign Portfolio Investment Levels In India Hit A 10 Year Low

ICICI Securities has put out a note arguing that the decadal-low FPI equity holdings are ironic given Indian fundamentals are approaching their historical best, including favourable cycles in terms of corporate profits, investment rate and tax buoyancy

By Govindraj Ethiraj
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FPI India Low
On today’s episode, financial journalist Govindraj Ethiraj talks to ICICI Securities equity strategist Vinod Karki, Bimal Kothari, Chairman of the Indian Pulses and Grains Association as well as Apar Gupta, advocate on technology law and columnist in Indian Express.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (02:33) Foreign portfolio investment levels in India hit a 10 year low
  • (08:46) Real estate investors in IT Hubs in Hyderabad or Bangalore made a killing in last 3 years.
  • (10:34) How prices of tur dal at home could depend on the outcome of a sinister battle with an African nation.
  • (19:15) Deepfake regulation is on the way, what will it involve?
  • (27:34) Record 518 million viewers watched world cricket over 48 matches.

NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.


Oil and Markets

Oil prices slipped further on Thursday thanks to the postponement of an OPEC meeting which led to speculation that the group might not deepen output cuts next year.

Brent crude futures were down to $81.06 a barrel on Thursday, after falling as much as 4% on Wednesday.

The oil market is quite uncertain and wrestling between the forces of demand which are weak and potential further supply cuts which are yet to happen. 

The rupee is still struggling in some ways, ending at Rs 83.34, roughly the same as the day before.

I say struggle because the dollar is weakening now and other Asian currencies including the Chinese yuan are slightly stronger. Earlier, a strong dollar was pushing down almost all Asian currencies.

Back home, most of the action was in the primary or IPO market with the star of the show Tata Technologies continuing to rake in funds though its been oversubscribed already. This week has about Rs 7,000 crore worth of IPOs lined up and closing today.

Either because all surplus funds have presently flowed into the IPO market or external factors continued to weigh, Indian markets were largely listless. The BSE Sensex touched 66,018 - down 5 points. The Nifty50 managed to hold above the 19,800 level for another day, even as it closed 10 points lower.

Meanwhile, foreign Portfolio Investors have been selling steadily since September and onto November with some mild reversals in November.

One reason for this is a major selling wave in stocks of finance companies and switching to industrials and other sectors.

But the buying in the rest of the market is not making up for the selling in financials.

The net result is that FPI holdings are now at their lowest level in a decade at 16.6%. 

ICICI Securities has put out a note arguing that the decadal-low FPI equity holdings are ironic given Indian fundamentals are approaching their historical best, including favourable cycles in terms of corporate profits, investment rate and tax buoyancy.

Of course supply is supply and FPIs have been selling across Asias as interest rates went up in the United States and it became more attractive to pull money back.

Though it does tell us that India is or was not able to beat the trend in the region. The switching out of financials must have made it more difficult.

Aggregate holdings of FPIs stand at INR 54.5trn, as of Nov '23 which is the lowest since 2012, said ICICI Securities.

To understand why foreign investments were at such lows and also to what extent it even mattered, I reached out to ICICI Securities equity strategist Vinod Karki and began by asking him why this was happening now ?


India’s Best Property Markets To Make A Killing In The Past

If you want to make money in property, go buy in an IT hub somewhere, or preferably in Hyderabad or Bangalore followed by Pune.

But that was the case for the last three years, I wonder if it will be the same for the next three.

As it happened I passed through Gachibowli earlier in the week for a conference I was attending at the International Convention Centre and was struck by the staggering change in the area, having visited the Indian School of Business first around 2002 when the business school was pretty much all there was to this place.

At a 33% growth, Gachibowli has now posted the highest average jump in micro markets or areas in India among the top 7 cities between 2020 and 2023 so far. The figures are from Anarock Research, the real estate consulting firm.

So basically if you had bought property in Gachibowli in 2020, you would have made a 33% appreciation by now. If you had bought in Kondapur, which is around 15 minutes and 6 km away, prices would have appreciated by 31%.

Further south, Whitefield in Bangalore would have got you a 29% rise and Sarjapur would have got you 27% rise.

Pune came after Wagholi in Pune at 25%.

Basically, to reiterate, all are IT hubs, a reflection of where the growth, prosperity and of course need for housing and commercial space has come from.

Lower Parel in Mumbai, where we broadcast from, saw a 21% appreciation, which is quite crazy I would think.

Intrigue And Trade Wars In Pulses

Last month, the inflation rate for pulses, which includes deals like Tur, was ruling at close to 19%, while overall inflation was around 4.8% and food inflation was 6.6%.

India could consume around 4.4 million tonnes of pulses in all which includes tur and urad dal of which roughly 900,000 tonnes or close to a quarter would be imported.

The first part of the story is that prices in the domestic market have come down somewhat, in anticipation of harvests. 

This should hopefully reflect in lower inflation numbers for November which will be out next month.

The second part of the story is to do with imports from Mozambique.

India signed an MoU with Mozambique to import around 200,000 tonnes of tur dal. Last year, India imported close to 460,000 tonnes of Tur Dal from there. India also imports from Tanzania, Malawi and Myanmar.

The problem this year is that because of a problem of either cornering by some exporters in Mozambique and some alleged collusion with some Government officials, a large part of the cargo is yet to be shipped to India.

Since only around 150,000 tonnes has come so far, much more could be shipped, if it could be.

This has upset Indian importers who have gone and complained to all the powers that be in Delhi, including of course the PMO who while I am not privy to details is presumably charged up to do something since food prices is something this Government has been responding with alacrity at a diplomatic level as well.

To get a sense on what the domestic landscape for tur dal and pulses was looking like right now and how the imports imbroglio was affecting prices, I reached out to Bimal Kothari, Chairman of the Indian Pulses and Grains Association and asked him to first give us a sense on the domestic market.


Regulation For DeepFakes Is Coming

It's interesting that the discussion on deep fakes has accelerated just at a time when a battle royale cum drama over the leadership of OpenAI, the company that owns ChatGPT has just ended with Sam Altman returning as CEO to a company he was sacked from just 5 days before.

Be that as it may, this is one area where no Government or rather most Governments are moving fast and India is not far behind.

 The government will in 10 days issue draft rules to tackle deep fake videos and images, said Information Technology Minister Ashwini Vaishnaw on Thursday, proposing to tackle the menace with penalties on creators and platforms, reported the Business Standard.

"We will start drafting regulation today itself, and within a short time we will have a new set of regulations for deep fakes ... this could be in the form of amending existing framework or bringing new rules, or new law," said Vaishnaw at a media briefing in New Delhi.

Vaishnaw said that the immediate "four pillars' ' of focus will be detecting deep fakes and misinformation; preventing their spread, strengthening reporting mechanisms, and creating awareness.

In the past few weeks, deepface videos have emerged on social media of celebrities and politicians including one involving Telugu actor Rashika Mandanna which set off a firestorm of sorts.

To understand what the legal scope could be for these deep fake regulations and how it could be implemented, I reached out to Apar Gupta, advocate on technology law and columnist in Indian Express and began by asking him what the likely composition of these new guidelines could be.


Record Viewership For Cricket

Walt Disney said on Thursday its TV channels in India and digital streaming platform both set new viewership records in the recently concluded men's cricket World Cup.

A record 518 million viewers from India watched matches during the 48-day event on TV, while Disney's streaming app recorded a peak concurrent viewership of 59 million during the finals.

You could watch the World Cup cricket free on smartphones via Hotstar. JioCinema too has made cricket free to watch on phones.

India hosted the 13th edition of the World Cup Cricket series from Oct. 5-Nov. 19.

India lost in the finals played in Ahmedabad.

The International Cricket Council (ICC) has said that a record 1.25 million attended the matches from the stands during the World Cup this time.

On that note, there is of course more cricket coming up in coming days, including the shorter, snappier T20. Stay tuned.