While FIIs are selling big on Indian equities, domestic investors are betting on every dip
- During FY22, FIIs sold ₹1.40 lakh crore in equities compared to last year when it was a net buyer of ₹2.74 lakh crore.
- Meanwhile, DIIs were net buyers of ₹1.26 lakh crore in first eleven months of FY22 compared to net net sale of ₹39,000 crore last year.
- Markets do not seem to be intimidated by the selling spree of foreign investors as domestic investors have been at the rescue like never before.
AdvertisementIndian equity markets have faced a myriad of challenges in the financial year that just ended (FY22), but it not only managed to survive, but thrive throughout the journey.
Markets were resilient despite foreign institutional investors (FIIs) selling a huge amount of equities i.e., ₹1.40 lakh crore in FY22 compared to last year when it was a net buyer of ₹2.74 lakh crore. Since January 2022 till date, it has sold ₹10.13 lakh crore in Indian equities.
All this because of the unexpected pandemic that hit the country badly followed by another event that escalated inflation in the country -- Russia-Ukraine war -- and most importantly because of monetary tightening in the US, which makes the US debt market more attractive to FIIs. And hence the huge sell-off.
Apparently, this is one of the worst outflows from India by FIIs in many years.
Despite this, Indian markets outperformed global peers including the US and UK during the financial year as Nifty 50 surged 19%.
Domestic institutional investors have been like a ‘Knight in shining armour’ for markets
(Source: Angel One)
|Category of investors||FIIs||DIIs (Apr 2021-Feb 2022)|
|Ney buy/sell in FY22||-₹1.40 lakh crore||₹1.26 lakh crore|
Even after a challenging time since COVID-19 that triggered the sell-off by FIIs, markets do not seem to be intimidated by the selling spree of foreign investors as domestic institutional investors (DIIs) have come to the rescue like never before.
DIIs were net buyers of ₹1.26 lakh crore in first eleven months of FY22 compared to net net sale of ₹39,000 crore last year.
Domestic Institutional Investors are institutions like insurance companies, mutual fund houses, pension funds, or provident funds.
The constant surge in systematic investment plan (SIP) inflows is among reasons markets have been offsetting most of the selling pressure from foreign investors as every market correction is seen as an investment opportunity.
AdvertisementThe mutual fund industry has 5.17 crore SIP accounts with SIP assets under management (AUM) at ₹5.49 trillion as of February 2022.
Apart from domestic institutional investors, retail and high-net worth individuals also played their part. Not to forget, Indian markets have added record demat accounts in the last two years because retail investors have shown huge interest in equities.
“Higher US inflation and tapering remain a concern which is reflected in FII selling in FY22. However, the Indian market is supported by DII due to buying,” Amarjeet Maurya of Angel One. Tapering by the US Fed refers to when the Fed gradually decreases the asset purchase every month that it did to boost economic growth.
“We are witnessing consistent buying by domestic investors in the face of unprecedented selling by foreign portfolio investors (FPIs) during rare and extreme fear-inducing events seen over the past few years (COVID pandemic, Russia-Ukraine conflict, monetary tightening). This is a clear positive surprise and heralds the structural deepening of domestic savings into equities in India. Such behaviour of aggressive buying during declining stock prices by domestic investors should result in improved long-term outcomes for their portfolios vs buying in a high-optimism phase of the market, and thereby setting off a virtuous cycle,” said Axis Mutual Fund.
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