DIIs on profit booking spree as markets hit new high
Domestic institutional investors (DIIs) have turned cautious in equity markets, even as foreign portfolio investors (FPIs) pump benchmarks to new heights.
DIIs were sellers in 12 out of the last 13 trading sessions and cumulatively sold for ₹16,321 crore. On the other hand, FPIs injected Rs 33,250 crore, including aggregate deals in the same period.
Nifty’s rise of more than 3,000 points from its March low gave the private equity index ample opportunity to take profits amid concerns about valuations.
Expect profits
Deepak Jasani, Head of Retail Research, HDFC Securities, said equity investment by the local institution depends on the fund manager’s perception of the current market valuation and the direction of the inflows.
He added that the current rally in the market was based on the expectation of earnings growth over the next few years and that the current earnings season will either confirm or cancel the earnings forecast in the near term.
Feelings of aversion to risk
Amiya Ranadiv, equity research analyst, Choice Broking, said the global economic situation can play a significant role in investment decisions of DIIs and that worry about the global economic outlook leads to a sense of risk aversion.
With general elections scheduled for next year, Ranadev said DIIs are worried about government policies or any regulatory changes that lead to volatility and risks in the market.
DIIs book profits
Vaibhav Shah, director of the Torus Oro PMS Fund, said foreign investment indicators have turned positive over the past few months in Indian markets due to better fundamentals, financial management, moderate inflation and reallocation from China.
However, he said that for the time being as the macroeconomic scenario develops, DII will book some profits and look forward to more conviction on the underlying fundamentals.
Portfolio rebalancing
With the markets at an all-time high, there is some selling by DIIs, particularly from the well-balanced mutual fund category, which has rebalanced the portfolio with equity valuations above the fund’s mandate limit, said Manish Chaudhry, head of research at StoxBox.
He said effective domestic monetary policy, stable political environment, improving macroeconomic fundamentals and a large margin of growth in corporate earnings are very unique to India at the moment and should help maintain inflows.