Indian investors offset FPIs pull out effect

Mumbai: Led by insurance firms and mutual funds, domestic institutional investors have come to the rescue of Indian equity markets during the past two months providing the much-needed cushion against a sharp sell-off by foreign portfolio investors (FPIs). Market experts pointed out that the fall in the domestic equity markets would have been much sharper in the absence of strong buying by domestic institutions.

Data provided by stock exchanges and Securities and Exchange Board of India (SEBI) showed that domestic institutional investors (DIIs) had invested more than double the amount sold by FPIs during the last two months.The issue of retrospective taxation, lower than expected corporate earnings, fear about a rate hike by the US Federal Reserve and the probability of a default by Greece led to some kind of risk aversion among global investors.

However, flush with strong inflows from small investors, domestic institutions took advantage of the fall in the market to add some quality stocks into their portfolio. Insurance companies and mutual funds have together bought shares worth Rs18,500 crore since the beginning of May this year when compared to Rs 9,102 crore worth of shares sold by overseas investors during the period.
“It’s true that FPIs had turned a little cautious due to various domestic as well as global issues.

However, domestic insurance firms and mutual funds have seen good amount of inflows from small investors for the past many months. They are following a good strategy of picking up quality stocks at every fall in the market with a long-term horizon,” said Sudip Bandyopadhyay, managing director and chief executive officer, Destimoney Securities.  

“The domestic institutions like insurance firms and mutual funds are seeing month-on-month strong inflows from small investors. The markets are now trading 14-15 per cent down from their peak and the valuations are also looking quite attractive at the moment,” said S. Krishna Kumar, head of equity, Sundaram Mutual Fund. According to him, the markets are now trading below their long-term historical average valuations and sectors like automobiles, industrials, capital goods and financials are looking attractive from a long-term perspective.