The current sell-off in the equity market jolted investors as benchmark indices BSE Sensex and NSE Nifty fell below the level before the Modi government era. Since the beginning of January 2016, Sensex fell 2,055 points, or 7.87 per cent, to 24,062.04 till January 20. The index was at 26,117.54 on December 31 last year.
In the present market mayhem domestic fund houses emerged as net buyers in the Indian equity markets. Consider this: during Jan 1-20, foreign institutional investors sold shares worth Rs 7,146 crore in the domestic equity markets. However, domestic institutional investors, or DII, are looking bullish on India story as their net buying stood at Rs 9,249 crore during the same period.
On FIIs money, Vidya Bala, head of mutual funds research, Fundsindia.com, said, “FII money is more global money so any macro events on the globe require a readjustment of their portfolio, which they are doing through withdrawal. Also, part of FIIs funds is sovereign wealth money that belongs to the wealthy nations. At present, wealthy nations are under slowdown due to lower oil prices, hence FIIs are pulling out a bit of their sovereign wealth from emerging markets. Also, since the US Federal Reserve started hiking interest rates there was some pull out of money from economy as arbitrage opportunity shrunk a bit because interest rates are going up in the US and returns were shrinking in emerging markets which can be another reason for FII outflows from India.”
Going with the data, out of past 14 trading sessions domestic institutional investors remained net buyers in 12 trading sessions. On domestic institutional investors, She said, “ DIIs mainly focus on India and the country is far better than other emerging economies in terms of growth. They are buying good stocks at reasonable valuations. In every falling markets when FIIs are selling, you will see DIIs on a buying spree.” DIIs include mutual funds, insurance companies and other institutional investors locally.
During the period, the market capitalisation of the companies listed on the BSE shrank by Rs 10 lakh crore in 14 trading sessions so far in calendar 2016.
According to Kotak Institutional Equities, the correction will offer investors an opportunity to increase exposure to good long-term stocks where valuations are reaching interesting levels.