FPIs, domestic financial institutions invest Rs 27,500 crore into equities in May

“There are worries over the economy. Markets were expecting gradual opening up. Several states, including Maharashtra, are planning to extend the lockdown by one more month. This may turn out to be a dampener,” said an analyst.

As FPIs had pulled out Rs 22,935 crore from the debt market in May, there was a net outflow of Rs 7,356 crore in May. FPIs have pulled out Rs 40,345 crore from equities since January this year and Rs 1.05 lakh crore from the debt market. The market will stage a rally if the lockdown is relaxed and normal business resumes by the first or second week of June.

“Phased reopening of the economy, in line with global trends, will go a long way in boosting business confidence apart from opening opportunities for jobs and incomes. It is important to understand that the unprecedented high global unemployment is the product of the great lockdown and not due to any economic crisis. Therefore, we can expect jobs and incomes to bounce back sharply. However, managing the spread of the disease arising out of opening would be a challenge,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

Mutual funds (MFs) invested Rs 6,363 crore in stocks in the last week of March, while they pulled out Rs 7,965 crore in April. Reversing the selling trend in May, they put in Rs 2,832 crore, the data showed.

In addition, MFs are keeping high liquidity for any possible redemptions by corporate houses as post-lockdown, the industry is likely to face a lot of redemption pressure as corporates will withdraw a lot of money.

Meanwhile, MFs have also been witnessing net inflows in equity-oriented schemes. Such equity-oriented funds received a net inflow of Rs 11,723 crore from investors in March and Rs 6,213 crore in April.

Vinod Nair, head of research, Geojit Financial Services, said, “Benchmark indices had a positive week and gained by around 5.7 per cent. Although the number of new infections remained elevated in India, the general expectation was that the economy would slowly start emerging out of restrictions, post-Lockdown 4.0, except in the hotspots.

“Globally, the markets were heaving a sigh of relief after more stimulus packages were announced by China, the EU, and other countries, following the easing of lockdown measures. However, these gains were somewhat clouded by the persistent US-China tensions, which threatened to affect the global trade and recovery process.”

The banking index in India made a strong comeback last week on the back of some value buying. However, concerns with regards to heightened non-performing assets remain, and the market is expecting sector-focused relief packages and measures to boost demand in the economy, he said.