As per data available on the BSE, DIIs have sold $11.54 billion worth of equities between January and December 9. In contrast, FIIs have bought $18 billion worth of equities in the current calendar year.
On Monday, DIIs sold $197 million in equities, taking the net sales since October to $3.9 billion. Over this period, the benchmark indices have gained close to 10%. The selling from DIIs so far this year is already well ahead of $9.3 billion in 2012.
Mutual funds have been responsible for a bulk of the selling due to heavy redemption pressure, which has pushed net sales of equities by MFs to $3.58 billion. Meanwhile, insurance companies have sold $592 million worth of equities so far in the current calendar year as per the BSE data.
According to experts, domestic investors are seeing the recent rally as a good opportunity to exit their investments. In the last five years, the markets havent seen any sharp upmove. So, a certain category of investors are exiting, said Kaushik Dani, head (equity funds), Peerless MF.
On Monday, benchmark indices Sensex and Nifty gained 1.57% and 1.66%, respectively, following the results of four state assembly elections over the weekend, which indicated that a BJP-led government may come to power in 2014. Many brokerages view a BJP victory as positive for the markets. The rally took the tally of gains in the Sensex and Nifty to 9.67% and 7.71%, respectively, in the year-to-date period.
According to experts, DIIs could resume buying if the markets are able to sustain the rally. Mutual funds tend to face redemption pressure at higher levels. DIIs are likely to resume buying if markets find stability at higher levels, said Pankaj Pandey, head (research), ICICI Securities.
According to domestic fund managers, money is moving out of defensive sectors. Defensives have been commanding high valuations as there was economic uncertainty. However, with signs of capex cycle reviving after elections, cyclicals and rate-sensitives have been drawing inflows, added Dani.
Meanwhile, insurers are seeing redemptions in unit-linked insurance products (Ulips). The lock-in period for several Ulip investors ends in 2013. They are taking out their money with 15-20% profits, said Nirakar Pradhan, chief investment officer, Future Generalli India Life Insurance. With GDP expected to grow 5-6% next financial year, funds are being rotated towards high-beta stocks, he added.