Exodus of foreign investors from Indian markets continues unabated in October. But DIIs are holding the fort steady

The ongoing sell-off by foreign investors continues to loom large on Indian markets. In October so far, FIIs (foreign institutional investors) have already withdrawn Rs 74,732.20 crores. Not for a single day this month have FIIs poured money into India. The sell-off started on October 1, when foreign investors withdrew Rs 5,579.35 crore. The highest withdrawal of this month came on October 3. 2024, when FIIs sold Rs 15,243.27 crore worth of assets. Yesterday, i.e. on October 17th, FIIs pulled out Rs 7,421.40 crore from the markets.

Experts state that FIIs are continuously putting pressure on Indian stocks, but the situation is expected to improve in the coming weeks with a sharp recovery anticipated.

"We remain optimistic as the FII selling may have crossed the half way mark already and as it tones down, the domestic flows will help a recovery. When the recovery happens it will sharp and concentrated, giving long term investors motivation to stay put during the harrowing volatility of a roller coaster market that has repeatedly tested support levels but remains oversold, hence ripe for a bounce sometime in the next few weeks" said Ajay Bagga, Banking and Market Expert to ANI.

Between January and October 2024, foreign investors have invested a net of 1,87,298 crore in India. This year, apart from the current sell-off, January, April and May also saw investment outflows by FIIs.

The intense selloff comes right after September, when foreign investors invested a record Rs 93,538 crore in the Indian markets. June, July and August 2024 had also seen positive inflows from foreign investors of about Rs
41,757 crore, Rs 48,796 crore and Rs 25,493 crore respectively.

However, a resilient, strong domestic investor base is keeping Indian markets afloat. DIIs (domestic institutional investors) have been consistent buyers throughout this month, largely balancing the outflows prompted by FIIs. In October so far, DIIs have invested about Rs 68,961.37 crore in the market, with the highest monthly inflow coming in on October 7th. While DIIs invested Rs 13,245.12 crore in Indian markets on that day, foreign investors withdrew Rs 8,293.41 crore.

Yesterday i.e. on October 17, 2024, DIIs invested Rs 4,979.83 crore in the markets. At present, experts note that DIIs are flush with cash at the moment, with mutual fund inflows reaching an all-time high of Rs 24,509 crore in September 2024, a record 52.78% jump from the corresponding year ago period, where they stood at Rs 16,042 crore.

Generally, keeping around 3-5% of their assets in cash is considered an acceptable practice amongst mutual fund houses. As per reports, mutual funds are currently in possession of Rs 1.86 lakh crore worth of cash, which constitutes 5.03% of their total AUM as of September 2024.