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In response to a dramatic sell-off by foreign institutional investors (FIIs) this week, domestic institutional investors (DIIs) have stepped in to stabilize the stock market and reinforce investor confidence, experts reported on Saturday. This move comes as FIIs executed substantial sell-offs in the cash market due to weak global cues.
FIIs sold approximately ₹19,544 crore worth of equities in the initial four days of the week. However, by Friday, the market showed signs of stabilization, with FIIs transitioning to buyers for a modest ₹406 crore. The recent trend highlights the increasing importance of domestic investors in the market.
Since the end of 2020, FIIs have been net buyers of ₹1 trillion in equities, while mutual funds have significantly outpaced them with net purchases totalling ₹6.2 trillion. This disparity underscores the growing influence of domestic institutions in recent years.
Experts attribute the resilience of the Indian stock market to several factors, including robust economic growth, effective monetary policies by the central bank, and substantial retail investor inflows. Alok Agarwal, Head of Quant and Fund Manager at Alchemy Capital Management emphasized that domestic funds remain optimistic about India’s market potential due to these elements.
Sunil Damania, Chief Investment Officer at MojoPMS, noted that despite global negative news, the Indian market has shown remarkable stability. Retail investors are increasingly using market dips to boost their equity holdings, reflecting a shift from past trends.
Damania also pointed out that India’s current market valuations are high compared to historical levels in other emerging markets. Despite record inflows from FPIs last year, there has been a noticeable decrease in inflows this year, with average monthly inflows dropping from ₹15,000 crore to ₹4,000 crore year-to-date in 2024.
Domestic funds are optimistic about India’s long-term growth, driven by sectors such as manufacturing, pharmaceuticals, and renewable energy. Enhanced financial literacy and a growing investment culture in India have further fueled this optimism. Experts believe that India’s stable government, strong economic growth, and attractive corporate metrics will continue to draw investor interest, both domestic and international.