At a time when foreign institutions have been on a buying spree in Indian equities, their domestic counterparts have taken a contrarian call. According to stock exchange data, domestic institutional investors (DII) have sold shares worth over R29,000 crore in the current calendar year. On the other hand, foreign institutional investors (FIIs) have bought over R53,000 crore of Indian equities in CY12.
Experts attribute this trend to the fact that domestic institutions have been facing huge redemption pressure at a time when the domestic and global economic situation is not favourable for investment. The flow of insurance money into the equity market has also taken a hit ever since Ulip norms have been changed, with a bulk of fresh money pouring into traditional plans that have a lower equity allocation.
?The macro-economic scenario is weak here as well as in the international markets, which is forcing domestic investors to redeem money out of equities and park their funds in instruments that offer decent returns and have low risk,? said Aneesh Srivastava, CIO, IDBI Federal Life Insurance.
Srivastava said that DIIs are largely driven by retail investors. Hence, due to weak market conditions and muted earnings growth, participation of domestic investors has gradually been on the decline.
Statistics show that domestic investors sold the most in February (followed by January and March) when fears of the Europe debt crisis had heightened and the recovery in the US economic growth did not look convincing. Saurabh Nanavati, chief executive officer, Religare Asset Management Company, said, ?Domestic investors are moving from equity to debt because the rally seen in equity markets worldwide is not convincing. The decline on the part of domestic institutions has been due to direct function of redemption by retail investors, which has been a trend globally.?
Experts attributed the recent selling by domestic institutions to the lack of monetary and fiscal reforms. In July and August, domestic institutions net sold Indian equities worth R5,270 crore and R4,332 crore, respectively.