Even as foreign investors were pumping money into Indian stocks, domestic institutional investors (DIIs) have pulled out money. DIIs have sold nearly two-third as much as foreign institutional investors (FIIs) have purchased since January 2012. DIIs include banks, domestic financial institutions, insurance, new pension scheme and mutual funds.
Consolidated data on the BSE and NSE show that DIIs have pulled out nearly Rs 19,000 crore (close to $4 billion) since the beginning of 2012. This is in contrast to the Rs 37,000 crore ($7.5 billion) worth purchases made by FIIs since January.
If one removes the FII buying of about Rs 9,500 crore in HDFC shares that was offloaded by Citibank, then the gap narrows.
LIC Effect
Brokers and market analysts are of the opinion that 60-70 per cent of Rs 19,000 crore has been pulled out by LIC to participate in various divestment plans of PSUs. But an LIC official said: “Where we have seen good valuations, we have sold. When the opportunities were good, we have booked profits.”
“Over the last two years, we have increasingly been seeing a trend of DIIs selling, when FIIs are buying,” said Mr Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities. “Rs 19,000 crore is an alarming figure because it can be said that both DIIs and FIIs are market movers now,” he said. In the same period last year, DIIs bought more than they sold. The net figure amounted to Rs 11,025 crore.
Many brokers are also of the opinion that larger macro-economic issues could have led DII churning their portfolios so much.
“High fiscal deficit and the upcoming Budget could be some reasons for higher selling figures. Also, redemption pressure could be another factor that could have forced them to sell,” said Ms Madhumita Ghosh, Head of Research, Unicon Financial Intermediaries.
“When the markets slightly improved in January, DIIs saw it as a good opportunity to sell and make a profit. Since mid-January there has been high buying and selling,” said Mr Prakash Diwan, Head - Institutional Equity, Asit C Mehta.
Looking ahead, market experts see heavy selling by FIIs as a result of developments on the political front. At that time, DIIs may step in, they say.
According to Mr Kishor Ostwal of CNI Research, one should not read too much into institutional trading. It has to be read in conjunction with institutional dealings in the derivatives market.
“Unless the market regulator makes it compulsory delivery in the F&O segment, these data will not give a clear picture of institutions' strategy,” Mr Ostwal added.