Year in Review: Broader markets continue to lag as FPIs stick to large-caps

Polarisation in the markets continued in 2019, with institutional flows sticking to safety of large-caps. As a result, the broader markets continued to lag. The Nifty Midcap closed 5 per cent lower, while the Nifty Smallcap fell about 11 per cent. Domestic institutional investors (DIIs) also shied away from committing large funds, as fund managers avoided mid- and small-cap stocks with no major signs of an earnings recovery. In 2019, DIIs bought Rs 41,443 crore of equities, which was not even half of the Rs 1 trillion put in by foreign portfolio investors (FPIs). Even though the Nifty touched its lifetime high as the year came to a close, sentiments of individual (retail and high-networth) investors were far from restored. Individual investors, looking for exits from underperforming schemes, made use of market highs to pull-out funds. Redemptions jumped 47 per cent to Rs 16,268 crore, over the previous month. Mid-cap schemes – which were a big draw among retail investors – returned a measly 2.4 per cent in 2019, and small-cap delivered negative returns of 2.2 per cent. Amid these uncertainties, equity flows fell 78 per cent month-on-month to a 41-month low of Rs 1,300 crore in November.