Domestic institutional investors (DIIs) have stepped up their selling this month, taking advantage of the abundant liquidity and attractive stock prices. So far in July, DIIs have sold shares worth Rs. 9,383 crore — the highest monthly selling since February 2021, when they had yanked out ₹16,358 crore, stated a report by Business Standard.
As per the report, both in February 2021 and July 2023, foreign portfolio investors (FPIs) were strong buyers and the markets had rallied despite the DII selloff. In February 2021, the Sensex had rallied 6.6 percent as FPIs had poured in ₹21,960 crore, while so far this month, FPIs have bought shares worth ₹22,594 crore and the benchmark Nifty has gained nearly 4 percent, noted BS.
One must note that DIIs largely comprise domestic mutual funds (MFs), insurance companies, provident funds and pension funds. Experts attribute the selling by DIIs and a slowdown in purchases by MFs to profit-taking and moderating investments in equity MFs, the report mentioned.
“We had seen strong domestic inflows to the tune of around $36 billion last year (2022), more than offsetting FPI outflows ($17 billion), supported by robust MF equity inflows. This year, though, SIP flows have remained resilient so far. We are seeing signs of moderation in non-SIP contributions to mutual funds and net SIP-folio additions. This has impacted DII fund inflows in recent months to some extent,” said Kunal Vora, head of India equity research, BNP Paribas, was quoted as saying by Business Standard.
Compared to last calendar year, both DIIs, as well as MFs, have slowed their purchases in 2023. As per the report, in 2022, MFs had pumped in ₹1.86 lakh crore, while DIIs bought shares worth ₹2.77 lakh crore amid a rise in the share of financial assets in household savings. The strong buying by DIIs had proved a solid counterweight to FPI selling, noted the report. In 2022, FPIs had pulled out ₹1.25 lakh crore from domestic equities but despite that, the Nifty managed to rise 4.32 percent this year, it added.
