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DIIs accumulate 12,818 crore of stocks in last 6 sessions: Domestic institutions bought stocks as FPIs rushed out during market rout

🔴 On Friday, when the Sensex fell 1,688 points, FPIs pulled out Rs 5,785 crore from Indian markets while DIIs invested Rs 2,294 crore, according to data available from stock exchanges.

Written by George Mathew | Mumbai |
November 28, 2021 3:00:50 am
DIIs accumulate 12,818 crore of stocks in last 6 sessions: Domestic institutions bought stocks as FPIs rushed out during market routThe big question is whether retail investors will follow the exit route taken by FPIs. Retail investors have been pumping money into the stock markets through SIPs of mutual funds in the last 12 months. (File Photo)

Domestic institutional investors (DIIs) were active buyers last week when stock markets faced a nervous sell-off with foreign portfolio investors (FPIs) dumping stocks across the board.

While foreign investors exited from stocks worth Rs 25,000 crore ($3.34 billion) in the last six sessions, DIIs accumulated stocks worth Rs 12,818 crore during the same period. Domestic institutions have been using every major correction to buy into stocks and reshuffle their portfolios. The benchmark Sensex nosedived 2,901 points, or 4.83 per cent, to 57,107.15 in the last six sessions.

On Friday, when the Sensex fell 1,688 points, FPIs pulled out Rs 5,785 crore from Indian markets while DIIs invested Rs 2,294 crore, according to data available from stock exchanges. On November 24, when the Sensex declined by 320 points, FPIs sold Rs 5,122 crore stocks but DIIs were buyers of Rs 3,809 crore worth of stocks. Insurance companies led by LIC and mutual funds are the major players in the market, absorbing the sales triggered by FPIs.

“Domestic institutions follow the policy of ‘buy when others sell’. They are long-term players and utilise every opportunity to get stocks cheap,” said an analyst.

In November so far, FPIs have taken out Rs 31,124 crore from Indian markets while DIIs invested Rs 20,598 crore. LIC alone usually invests around Rs 50,000 crore in the markets every year.

Analysts are worried about the sell-off continuing in the wake of several uncertainties relating to the new Covid variant and tightening of the monetary policy in the United States. The sharp correction in the market on Friday was mainly triggered by concerns arising out of the new strain of the virus spotted in Africa.

In March 2020, when the Covid pandemic first hit the world, the market crashed with FPIs pulling out Rs 65,816 crore. However, DIIs which bought Rs 55,595 crore worth of stocks made a good profit as markets bounced back subsequently.

Setting the stage for further downward pressure on other world markets, the Dow Jones Industrial Average in the US on Friday dropped about 905 points, or 2.5 per cent, for its worst day of the year, while the S&P 500 and Nasdaq Composite slid 2.3 per cent and 2.2 per cent, respectively. The Dow was down more than 1,000 points at session lows.

The big question is whether retail investors will follow the exit route taken by FPIs. Retail investors have been pumping money into the stock markets through SIPs of mutual funds in the last 12 months. Another possible impact of the market rout will be on the IPO market which has been witnessing a flurry of activity with the entry of high-profile unicorns.

The FPI sell-off can accelerate if the US tightens monetary policy. “Foreign brokerages had downgraded India early this month on high valuations. India’s valuations vis-a-vis emerging market peers also became stretched. The further negative trigger came from the RBI observation that valuations are stretched,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

The market action next week will depend on how the new virus strain spreads and its impact on the world. There are concerns over rising inflation in the minutes of the recent US FOMC meeting, signalling higher chances of an aggressive policy tightening. Worries over overvaluation and a possible rate hike have been haunting foreign investors.

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