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Last month, selling by domestic investors, including mutual funds and insurance companies, surpassed buying by foreign institutions, the first time in about seven years.
In November, domestic institutional investors (DIIs) net sold shares worth about Rs 9,000 crore, while foreign institutional investors (FIIs) net-bought shares worth about Rs 7,000 crore.
According to Deutsche Bank, the trend of DII outflows exceeding FII inflows has been seen after 80 months (6.8 years). “November was the first month since at least April 2007 when DIIs’ monthly net outflows exceeded FIIs’ monthly net inflows. DIIs have now net sold $11.7 billion (Rs 66,635 crore) year-to-date, the highest DII outflows for the Jan-Nov period,” Deutsche said in its India equity strategy report co-authored by Abhishek Saraf and Abhay Laijawala.
Typically, domestic institutions are asset managers such as mutual funds and insurance companies, which are at the mercy of retail investors. Extreme volatility and uncertainty in equity market returns have kept retail investors at bay for the past five years.
“Selling at a new high has been consistent with retail investor behaviour, especially in the last two-three years. Now, many of these investors are hoping for a capital recovery. So, whenever there is a bounce in the market, they look at it as an opportunity to sell, not go long on the markets,” said Swapnil Pawar, chief investment officer at Karvy Capital.
In November, domestic institutional investors (DIIs) net sold shares worth about Rs 9,000 crore, while foreign institutional investors (FIIs) net-bought shares worth about Rs 7,000 crore.
According to Deutsche Bank, the trend of DII outflows exceeding FII inflows has been seen after 80 months (6.8 years). “November was the first month since at least April 2007 when DIIs’ monthly net outflows exceeded FIIs’ monthly net inflows. DIIs have now net sold $11.7 billion (Rs 66,635 crore) year-to-date, the highest DII outflows for the Jan-Nov period,” Deutsche said in its India equity strategy report co-authored by Abhishek Saraf and Abhay Laijawala.
Typically, domestic institutions are asset managers such as mutual funds and insurance companies, which are at the mercy of retail investors. Extreme volatility and uncertainty in equity market returns have kept retail investors at bay for the past five years.
“Selling at a new high has been consistent with retail investor behaviour, especially in the last two-three years. Now, many of these investors are hoping for a capital recovery. So, whenever there is a bounce in the market, they look at it as an opportunity to sell, not go long on the markets,” said Swapnil Pawar, chief investment officer at Karvy Capital.
Since September this year, DIIs sold equities worth Rs 30,687 crore. During this period, the benchmark BSE Sensex rose 7.9 per cent, while the National Stock Exchange Nifty gained 12.8 per cent. Between September and November, FIIs were net buyers of Indian equity by Rs 37,725 crore.
“Unless there is a decisive positive rally in the market, it is unlikely retail investors will turn buyers. Till there is a significant rise in the markets, investors will sell more than they buy at every rise in the market,” said Pawar.
The Deutsche report said, “Among the key Asian emerging markets, India remains the biggest recipient of FII inflows year-to-date ($17.6 bn), followed by Taiwan ($7.8 bn) and Korea ($6.4 bn). FIIs continued to pull out money from debt, albeit at a slower pace ($784 mn, against an average $2.4 bn in the preceding five months).”
