For every ₹100 pulled out by foreign investors from the Indian equity markets, domestic investors have ploughed back ₹89 this year

• India stock markets have outperformed their global peers despite an unprecedented foreign investor sell off in 2022.
• Since the beginning of 2022, foreign investors have pulled out over ₹2.6 lakh crore from the Indian markets.
• Despite this, Indian stock markets have remained resilient, and the credit goes to the domestic investors.

India has seen an unprecedented sell off by foreign investors this year. Yet, Indian stock markets have remained strong performers compared to most of their major peers globally – all thanks to domestic investors.

Domestic investors have been so strong in 2022, they have almost completely made up for the money pulled out by foreign investors.

It’s not just a momentary phenomenon either – a report by Morgan Stanley has discovered that since 2015, foreign investor holdings in 75 Indian companies have come down by 230 basis points to 24.8%, while mutual funds and individual investors have together increased their stakes by 737 basis points to 18.5%.

Here’s how Indian stock markets have performed compared to their global peers:

Index	YTD performance
Nifty50	1.6%
Sensex	1.4%
FTSE 100	-3%
Nikkei 225	-4.9%
Dow Jones	-14.9%
S&P 500	-17.7%
DAX	-18.7%
Nasdaq	-26%

Note: As on September 15, 2022

According to data, while foreign investors have pulled out over ₹2.6 lakh crore from the equity markets in 2022 till date, domestic investors have put in over ₹2.32 lakh crore.

Essentially, for every ₹100 pulled out by foreign investors, domestic investors have ploughed back nearly ₹89.


Several factors explain just how strong the domestic investor momentum has been in the past two years.

Here are a few reasons:

Three new demat accounts every four seconds since 2020

For one, the number of demat accounts have exploded – more demat accounts were opened in the last three years than the last two decades.

There were a little under 40 million demat accounts at the end of 2019. Then the Covid-19 pandemic broke out – with people cooped up in homes and there being very few avenues for investment, people thronged to the stock markets.

As a result, over 60 million demat accounts were opened between January 2020 and August 2022 – on an average, that’s a little under 2 million new accounts every month, or three new demat accounts every four seconds.


SIPs hit a record high – and they are only growing

Indians have taken to mutual funds and systematic investment plans (SIPs) in record numbers – according to data from AMFI, mutual fund accounts stood at 57.2 million at the end of August 2022.


But what’s even more interesting is the amount of SIPs – after touching ₹10,000 crore per month for the first time in September 2021, Indian investors have never looked back, with the average SIP per month now 63% higher than 2018.


This also reflects in the assets under management (AUM) of the Indian mutual fund industry – according to AMFI, AUM in August 2022 stood at ₹39.53 lakh crore.

This is over 5x higher than AUM in 2012, which stood at ₹7.53 lakh crore.

Indian mutual funds’ AUM stood at ₹30 lakh crore in November 2020, and it took the industry 22 months to add another nearly ₹10 lakh crore to its kitty.

Indians are taking to investing faster than ever before, and it’s now reflecting in a big way in stock markets and mutual funds.

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