Opposite Mentalities? Indian Stocks See FPIs Investing Rs 30,000 Crore While Domestics Sell Rs 10,000 Crore

At a time when India's stock market is enjoying a bull run--with both Sensex and Nifty hitting new all-time highs multiple times in recent weeks--it seems that domestic and foreign investors are working with opposite mentalities this month.

FPIs Invest Rs 30,000 Crore While DIIs Sell Rs 10,000 Crore

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Foreign Portfolio Investors' (FPIs) inflow into the Indian equity market remained strong as they invested over Rs 30,600 crore in the first fortnight of this month, driven by the country¡¯s robust economic growth and strong corporate earnings.

If this trend continues, investment by FPIs in July will exceed the figures recorded in May and June, which were Rs 43,838 crore and Rs 47,148 crore respectively. With this, inflow in the equity market reached Rs 1.07 lakh crore so far this year, data with the depositories showed, as per PTI.

According to the data, FPIs have been continuously buying Indian equities since March and infused over Rs 30,600 crore this month (till July 14). This figure includes investment through bulk deals and primary market, too, apart from investment through stock exchanges.

Besides equities, overseas investors injected Rs 1,076 crore into the Indian debt market during the period under review. In terms of sectors, FPIs continue to invest in financials, automobiles, capital goods, realty, and FMCG.

FPI buying sprees in these sectors have contributed to the surge in prices of stocks in such sectors and the Sensex and Nifty scaling record highs.

On the other hand, domestic institutional investors (DIIs) have sold around Rs 10,000 crore in the domestic equity markets in the last fifteen sessions. Analysts have referred to this as profit booking, which comes in the wake of a robust broad-based rally that began in April this year, as per Money Control.

Data from the National Stock Exchange (NSE) showed that from June 28 till 14th July, DIIs sold Rs 10,378 crore in Indian shares. They remained net sellers for eleven out of fifteen sessions. This selling comes in the wake of the Sensex and Nifty hitting record highs.

Since the start of this year, Sensex and Nifty have jumped around 8 percent each this year till date. The Sensex has already hit the 66,000-point mark while the Nifty went over 19,500.

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According to analysts, the recent surge in stock markets has led DIIs to take some money off the table and accumulate cash to be deployed later when valuations become attractive, post a correction or two, the report mentioned. Additionally, some of the selling activity may be attributed to redemption pressure from investors who share a similar perspective.

Also Read: Inside The Portfolios Of India's Biggest Stock Market Investors

What Market Analysts Are Saying

Market analysts are of the view that the outlook for FPI inflows into Indian equities remains quite bright and broad-based.

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"The concern, however, is the rising valuations which are getting stretched. The valuations in China are hugely attractive now compared to valuations in India and, therefore, the "Sell China, Buy India" policy of FPIs cannot continue for long," V K Vijayakumar, Chief Investment Strategy at Geojit Financial Services, said, adding that the decline in the dollar index to below 100 on Friday, the lowest level in one year, is favourable to emerging markets. India is the largest recipient of FPI flows YTD among emerging markets, as per PTI.

Before March, overseas investors pulled out Rs 34,626 crore collectively in January and February. "The incessant buying by FPIs could be attributed to a variety of factors, such as the country¡¯s robust economic growth, strong corporate earnings, and relatively competitive valuations of Indian equities compared to other markets," Sonam Srivastava, Founder of Wright Research, reportedly said.

"Further, the emerging capex cycle, the revival of Indian manufacturing, and a strong banking sector all seem to be playing a strong role in India¡¯s attractive story," she added.

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Also Read: Foreign Investors Ditch China To Invest Rs 72,000 Crore In Indian Stocks

Divam Sharma, Founder of Green Portfolio, said the major reason for the inflows was the investments into Adani group companies. "Additionally, there is confidence in the US that the Federal Reserve will start reversing the interest rates soon and also that the chances of a recession in the US are minimal, which are triggering a rally in US markets and also increasing the appetite for growth markets including India," he added.

"In the initial part of the year, DIIs were the key buyers when the trend was weak. But now FIIs and retail investors have taken on that role while DIIs are strategically booking profits. The selling could also be part of rebalancing portfolios to align with scheme objectives and perspectives, ensuring a balance between equity and other assets," said Vinod Nair, Head of Research at Geojit Financial Services, as per Moneycontrol report.

Also Read: How A Lost iPhone Led To Warren Buffett Investing Billions In Apple

Stark Contrast Between Foreign & Domestic Investors

Analysts have observed that domestic institutional investors (DIIs) have been exhibiting a contrasting pattern compared to FPIs. They noted that while FPIs were selling, DIIs acted as buyers, and now the situation has reversed, with DIIs selling while FPIs have turned into buyers. Since 1 April, FPIs remained net buyers, acquiring a total of $15.94 billion.

"It's true that DIIs are selling but on the contrary FIIs have invested over Rs 1 lakh crore this year and we always see this shift in hand when FII buys DII sells. But if we look closely on a bigger scale then DIIs have also been on the long side. So it's a win-win for the country as both are on a net buying spree," said Vikram Kasat - Head Advisory, Prabhudas Lilladher, as per the report.

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