According to analysts on Saturday, domestic institutional investors (DIIs) stabilized the market by reducing volatility and bolstering confidence, while foreign institutional investors (FIIs) resorted to large selling in the cash market this week due to negative global cues.
Alok Agarwal, Head, Quant and Fund Manager, Alchemy Capital Management, added that the growing involvement of domestic retail investors in mutual funds reinforced the market’s internal support structure and promoted a more stable investing climate.
Over the first four days of the week, FIIs sold securities worth a total of Rs 19,544 crores in the cash market. But on Friday, as the market steadied, FIIs adjusted buying, albeit only for a total of Rs 406 crore.
FIIs have purchased equities worth Rs 1 trillion net since the end of 2020, while mutual funds have purchased equity worth Rs 6.2 trillion.
In recent years, domestic institutions have significantly increased their relevance with six times greater net buying.
Experts claim that a number of reasons contribute to the local funds’ bullishness on the Indian markets.
“This resilience is attributed to India’s strong economic growth, the central bank’s effective monetary policy, and record inflows from retail investors,” Agarwal stated.
Sunil Damania, Chief Investment Officer of MojoPMS, said the Indian stock market has proven very resilient in the face of bad news around the world.
Retail investors are now, in contrast to earlier trends, taking advantage of market declines to raise their stock holdings, according to Damania.
FPIs, or foreign portfolio investors, usually seek values. India’s values are higher now than they have historically been for other emerging markets.
FPI inflows into the Indian market set records last year, therefore this year’s inflows are anticipated to be somewhat restrained. FPI inflows have decreased to Rs 4,000 crore year-to-date in 2024 from an average monthly inflow of Rs 15,000 crore in 2024, according to Damania.
Domestic investors are more optimistic about India’s sustained economic growth, which is being fueled by industries including manufacturing, pharmaceuticals, and renewable energy. Indians are becoming more financially literate and have a stronger investment culture, which has increased money inflows and fueled market optimism.
“India is a unique large country with double-digit economic growth, double-digit corporate earnings growth, and double-digit corporate return on equity (ROE) combined with stable government.” FIIs cannot be excluded for an extended length of time, the experts argued.
