The calendar year 2015 is poised to be the best year in terms of net inflows from domestic institutional investors (DIIs), as domestic institutions continue to invest into the equity markets at a time when foreign portfolio investors (FPIs) are offloading their exposure significantly.
The Indian markets have witnessed net inflows worth R64,744.74 crore from DIIs during the year even as the Sensex declined 7.6%. This is the best performance since 2008 when DIIs bought equities worth R71,683.85 crore.
This is also for the first time in the last four years that DIIs have been net buyers in the equity markets. DIIs had net sold equities worth R30,320.69 crore, R73,464.03 crore and R56,893.88 crore during the last three years, Bloomberg data showed.
“The traction in DII investments is due to return of retail investors into equity markets through the mutual fund route. Domestic mutual funds have witnessed more inflows in the last 18 months compared to 10 years before that,” said Nilesh Shah, MD at Kotak Mutual Funds. He added that the quality of these funds would be good as they come to market with long-term perspective.
Total inflows into equity schemes of mutual funds during CY15 was R86,959 crore, AMFI data showed.
Despite volatility in the stock markets, equity funds received inflows worth R6,379 crore during November, data showed.
Increasing investments by insurance companies into equity markets is also an important reason for surge in DII buying, market participants said. The data from the Life Insurance Council shows that the industry received over R66,997.80 crore as new business premium during April-October 2015. According to senior officials from state-run Life Insurance Corporation of India (LIC), insurers have invested approximately R40,000 crore in the equity markets so far in the current financial year.
DII buying comes as a relief for the Indian markets which witnessed sharp selling by foreign portfolio investors (FPIs) since June. Selling started in May when global investors started pulling out money from emerging markets (EMs) because of concerns over China’s economy.
The year-to-date FPI inflows stand at $2.6 billion, including the provisional numbers of Thursday. Annual FPI inflows in 2015 were the worst since 2011. FPIs have sold nearly $1 billion worth of equities since the beginning of December, anticipating a hike in interest rate by the US Fed, which is scheduled to meet next week.