Domestic institutional investors (DIIs) have continued to invest aggressively in Indian equities, pouring a staggering $10 billion so far this year. Total buying by DIIs in equity till August-end stood at $10.25 billion.
In contrast, foreign portfolio investors (FPI) have pulled out nearly $282.6 million from the equity markets during the same period, prompting some market watchers to say the FPI inflows are likely to grow further irrespective of a weak rupee.
The investment by DIIs includes mutual fund houses, banks, financial institution and insurance companies.
In July and August alone, DIIs bought stocks worth $613.4 million and $381.6 million respectively, while the Sensex yielded around 9.5% return. Although in April, May and June, the FPIs offloaded their holdings, in July and August they bought shares worth $207.9 million and $131 million respectively.
Going ahead, the FPI inflows are likely to grow further irrespective of the rupee being weak, says E Prasanth Prabhakaran, senior president and CEO at Yes Securites. So far, the rupee has depreciated 10.3% year-to-date and the Sensex has yielded a positive return of 12.5%, which has been primarily due to domestic flows.
“The economy has improved and the profitability and top line growth for the last three quarters has moved into three digits. Once this is consistent, we would see FPI flows irrespective of the rupee being weak,” added Prabhakaran.
According to a report by Yes Securities, the manufacturing sector has seen a 20% topline growth in sales figures this year, against a 12.6% topline growth for the same period in the previous year. Prabhakaran further added that after 9 quarters the services sector has seen 10.5% growth.
According to data from the Association of Mutual Funds in India (Amfi), Investors pumped Rs 10,585 crore into equity mutual funds in July against Rs 9,660 crore in June. Additionally, the AUM of the Indian MF Industry has grown from Rs 5.41 trillion in 2008 to Rs 23.06 trillion in July 2018.
Although the Indian economy grew 8.2% in June quarter from a year earlier, Nomura has warned about sustainability due to the ongoing global and domestic headwinds. “We have our doubts because higher oil prices, tighter global financial conditions and our view that the global economy is set to cyclically slow down suggest a number of external headwinds,” Nomura said in a report.