HoPE has been the biggest driving factor for the markets over the last few months as the Sensex has run by almost 20 per cent over the last three months since the opinion polls indicated victory for the BJP-led NDA.
However, this has been taken differently by different investors. While foreign institutional investors (FIIs) took it as an indication to enter the market, domestic institutional (DIIs) and retail investors saw it as an opportunity to book profits.
Foreign institutional investors have pumped in a net of Rs 44,855 crore in Indian equities beginning January 2014 (Rs 13,058 crore in 10 trading days of May alone). On the other hand, domestic retail investors seem to have taken this rise as an opportunity to book profits and thereby make an exit. As per the data with the Bombay Stock Exchange, while FIIs invested a net of Rs 3,634 crore on Friday alone, the DIIs pulled out a net of Rs 349 crore during the day.
Even in calendar 2014, the investment pattern of domestic investors stood contrary to that of the FIIs. For the client category at BSE, that mostly represents retail investors, net investment in domestic equities beginning January 2014 stood at a negative of Rs 11,621 crore, which reflects that retail investors took every rise in the market as an opportunity to book some profit.
The DIIs too invested only a net of Rs 658 crore in the five-month period.
The market seems clearly enthused with the mandate received by BJP that even got a clear majority on its own. One example that shows this is — barely two days after the results were announced the investment head of a leading financial services house left for investors meet across Europe. Experts say that more such trips will begin.
With a clear mandate, market experts feel that the road ahead may only be positive as the next government may be able to take some bold reform steps that may prove to be beneficial in the medium to long run.
If BJP manages to win a few state elections that are due later this year, it could strengthen itself further and it will be after nearly 30 years that there will be a government that has the numbers to go for meaningful legislation and administrative changes, which can be a basis for strong reforms. Experts therefore suggest that it is time to play India for the long-term.
Only the announcement of Narendra Modi as the prime ministerial nominee of BJP in September 2013, saw FIIs pump in over Rs one lakh crore in the Indian securities market—both debt and equity. As per latest data compiled by capital markets regulator Sebi, the net investments by FIIs into Indian equity markets stood at Rs 88,772 crore since the announcement. The same for debt markets was at Rs 13,399 crore — taking the total to Rs 1,02,171 crore.
While the inflows have sustained and have gained momentum in the recent past, they are expected to surge further as the Lok Sabha results met overseas investors’ expectations. “FII investments may pick up in a hurry,” said Swapnil Pawar, CIO, Karvy Capital.
The rise in markets has also seen a significant change in mutual fund performance. Over the last fortnight when the Sensex rose by 7.6 per cent, the average return for large cap funds stood at 8 per cent.
The best scheme in the category generated a return of 18.5 per cent. The banking funds have risen even more as the average return for such funds stood at 14.6 per cent with the best performing scheme generating a return of 16.6 per cent over the last fortnight.