Despite heavy bouts of volatility, Indian stock markets continue to receive impressive inflows from domestic institutional investors (DIIs), comprising mutual funds, insurance players and domestic financial institutions.
The DIIs — who have been net buyers for the last 24 sessions — purchased equities worth Rs 22,866.6 crore since August 11, making it their best buying streak ever. The average daily buying during the period was Rs 952.8 crore, Bloomberg data showed.
Market participants say that such strong purchases by domestic players have helped the Indian equity market avert a sharp crash like that in 2008.
In dollar terms, the net buying of DIIs in the mentioned period equals to $3.46 billion at an average rupee rate of 65.93 against the US dollar, which roughly matches the FPI selling of $3.8 billion during the period.
“One thing that has been different about this FPI selling compared to 2008 is that, back then, there was hardly anyone with enough muscle to absorb this liquidation without a significant price damage. Hence, the price and sentiment impact of selling was very high. Today, DIIs, mutual funds and insurance companies are much stronger and are able to absorb most of the impact. The FPI selling is more or less matched by DII buying,” said UR Bhat, director, Dalton Capital Advisors.
Market experts said domestic fund flows have been driven by the strong performance of the MF industry and change in investor perception towards real estate and gold as asset classes. The mutual fund industry witnessed inflows of Rs 8,903 crore into equity funds during August, which include ELSS, Amfi data showed. In FY15 so far, MFs have received inflows of Rs 47,948 crore.
“In the last one year, mutual funds have seen inflows on a consistent basis. Participation of retail investors during such a volatile time signifies that retail and domestic institutions of India have matured. In the past whenever markets crashed, investors would redeem their money, but now we are seeing a trend where investors are pumping in money at every fall in the market, “ said Sundeep Sikka, CEO, Reliance Capital Asset Management.
The Indian markets corrected sharply during August as FPIs slashed their exposure across emerging markets over concerns about China.
In mid-August, the Chinese government devalued yuan more than three times. The BSE Sensex lost more than 8% since the beginning of August. There also seems to be concerns among foreign investors over the impending interest rate decision by the US Federal Reserve, adding to their selling activity.
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