DIIs step in to stem Nifty fall despite anxious exit by FPIs/FIIs

MUMBAI: From the fund flow figures since the beginning of 2015, it is evident that foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) are not on the same page.

During the first three months of 2015, when inflows from FPIs surged, the domestic institutions invested less. However, since April, when FPIs began moving to other emerging markets, DIIs got an opportunity to buy stocks at relatively lower valuations.

DII holding in NSE-listed companies went up to 5.01 per cent at the end of March 31, 2015, from the year-ago level of 4.58 per cent, on an aggregate basis, say reports.

FPIs/FIIs vs DIIs in 2015




While, the overall investment by DIIs is less as compared to FPIs/FIIs in 2015, it has managed to stem the sharp fall in the Nifty. The benchmark index has managed to rally over 400 points between May 07 and May 19 despite tepid inflows from FPIs/FIIs.

"It is an extremely important trend. All this year, it was painful to see that people were happy to put money in assets which does not necessarily give real return but are ignoring equity as an asset class. Clearly, there are good days ahead for equity market from the domestic investor’s point of view," said Nilesh Shah, MD & CEO, Kotak AMC.

LIC takes the lead:

Life Insurance Corporation of India (LIC), the biggest domestic institutional investor in the country, has been aggressively buying equities in 2015. After increasing its exposure in frontline companies in the Jan-March quarter, it invested over Rs.8,000 crore on a net basis since April. It was supported by others. Overall DIIs, including LIC, bought equities worth Rs.19,764.03 crore since April.

Retail participation increases: It’s good to see retail investors making a comeback to equities after a long hiatus, say analysts. They are increasing exposure to equity markets Systematic Investment Planning (SIP) route. The number of new registrations is increasing by every passing day. New SIPs grew by 18 per cent to 73 lakh at the end of March 2015, up 18 per cent, as compared to 62.10 lakh, year-on-year.

Retail investors have about $10 trillion worth of real estate, between $2 and $2.5 trillion worth of fixed income assets, probably between $1 and $2 worth of gold, and just about $354 billion worth of equity.

"The SIP culture is coming back and there are more than 78 lakh Indians which are involved in SIP. A lot of this has started in the last one year and my request to all of them will be to continue their SIP and not stop it, even if there is a correction in the market," added Shah.

Other asset classes fail to deliver:

Investors, who invested in other asset classes such as real estate and gold in the past 5-7 years, are stuck. Their investments have failed to give substantial returns in the past one year while equities have shot up in the same period.

According to the Reserve Bank of India’s (RBI) All-India Residential Property Price Index, property prices remained stagnant between the fourth quarter of 2013-14 and the third quarter 2014-15, whereas the Sensex gave over 30 per cent return during the same period.

Bullion prices are also subdued to lower global commodity prices. Gold is down over 20 per cent, from its all-time high, after sub-prime crisis gripped the global financial markets.

"More importantly, if we can stop consuming gold, then the surplus money, which will arise in the economy because of non-investment in gold, will be good enough to take care of any FII and FDI inflow put together. So we are at a stage where domestic institutional and retail investor participation is increasing," Shah added.