If the combined net investments by mutual funds, insurance companies and banks in the equity markets is anything to go by, then such institutional investors have never been more bullish on Indian equities.
Such domestic institutional investors or DIIs have put in more than $10 billion, or ₹66,666 crore to be precise, in equities in the current calendar year, which has seen the benchmark indices touch new highs at regular intervals.
The BSE has the DII investment data since 2008 and the current year has seen the highest quantum of investment by DIIs in the January-July period. The previous high was approximately ₹45,205 crore, registered in the first seven months of 2008. Further, last year saw DIIs invest ₹26,127.05 crore in the same seven months.
A large section of market participants attribute the current rally to the strong flows by domestic investors since foreign portfolio investors (FPIs), who are often considered to be prime drivers of any bull run in the Indian equity market, have been net sellers at $700 million or ₹4,583 crore in 2018. “As we have seen in the past three years, the size of the local institutions has grown quite significantly,” Mihir Vora, chief investment officer, Max Life Insurance told The Hindu.
‘Selling by FIIs’
“In the past few quarters, the selling by FIIs has been absorbed by local institutions. Given the improved penetration of insurance [firms] and mutual funds, and efforts to further improve the same, financial savings should continue to grow at a healthy pace. Moreover, the move by the EPFO to increase allocation to equities and the rapid growth of the NPS schemes should further increase sustainable flows to equities annually,” he added.
Within the DII universe, mutual funds have been the most aggressive this year as a significant amount of fresh money poured in and the recent change in regulations led to most fund houses reallocating portfolios from the mid-cap and small-cap space to large caps.
The reallocation is also one of the key reasons why the benchmark indices have been registering new highs even as the broader market breadth has been weak. While the Sensex has risen almost 10% in 2018, the BSE Midcap and BSE Smallcap indices are down 10.72% and 14.46%, respectively.
Data from the Association of Mutual Funds in India showed that equity funds have seen net inflows of close to ₹32,200 crore in the current calendar till June.
