Domestic investors grow in strength as foreign funds take a step back
Despite heavy selling by FPIs, markets, have managed to increase to new highs.
Since January 2015, mutual funds have invested about Rs 4.16 lakh crore in domestic equities which is more than three times higher than the foreign investor inflows of Rs 1.21 lakh crore in the same period.
Inflows into financial products are anywhere between Rs 10,000 crore and Rs 12,000 crore a month in Indian equities, of which inflows into the sticky systematic investment plans (SIP) are over Rs 8,000 crore a month for the last 10 months. The cumulative impact of this sustained investment journey was clearly visible in the resilience of Indian markets seen in the past few years. Despite heavy selling by foreign portfolio investors, markets, especially largecaps, have managed to increase to new highs.
For instance, FPIs sold Indian equities worth Rs 35,800 crore in 2018, but the Sensex gained 6 per cent as domestic mutual funds bought nearly Rs 1.18 lakh crore. This is the power of retail investors and this has led to a big shift in power in capital markets from offshore players to onshore ones. A stronger dollar, a stalled earnings revival and muted returns combined to drive foreign funds out of India in the past few years.
Their ownership in BSE500 stocks declined from 53.26 per cent in September 2015 to 48.16 per cent September 2019.