Domestic institutions continue to sell shares

In eight of the last 10 sessions, domestic institutional investors (DIIs) sold more shares in Indian stock markets than they bought. In the last 10 sessions, these entities have been net sellers by Rs 1,306.9 crore, while foreign institutional investors (FIIs) net bought Rs 4,651.8 crore.

A combination of redemption pressure and the lack of fresh inflows is causing DIIs to press the sell button, say market watchers.

On Friday, the BSE Sensex rose 405.92 points to close at a record high of 21,919.79, while the National Stock Exchange’s Nifty rose 125.5 points to close at 6,526.65. DIIs were net sellers by Rs 669.58 crore, according to provisional exchange figures. On Thursday, when the Sensex had hit a new high of 21,513.87, DIIs were net sellers by Rs 567.1 crore.

Since the beginning of this year, FIIs have been net buyers by Rs 3,619.3 crore, while domestic institutions were net sellers by Rs 715.66 crore.

Experts have said domestic institutions, largely institutions such as mutual funds and insurance companies, have seen little in the way of fresh investments from retail investors, forcing them to sell when faced with redemption pressure.

Nirakar Pradhan, chief investment officer of Future Generali Life Insurance, said investors who put money into mutual funds and insurance schemes weren’t buying in a big way, despite the market hitting new highs. “Retail investors have not been putting money into the market for the last four-five years and DIIs have been selling, as they are not receiving fresh money. A large number of domestic investors had jumped in during the last leg of the last bull run before the market hit its peak in 2008...now, they are selling at every rise,” he said.

Vikas Khemani, president and co-head (wholesale capital markets), Edelweiss Financial Services, said the lack of interest among retail investors was affecting how domestic institutions approached the market. “The activity of DIIs really depends on receiving fund flows, which is not happening at this time,” he said. Pradhan said, “There is chance of a 10-15 per cent upside in the next six months, depending on the election results.”