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With the Indian equity market recovering post-Budget amidst resumption of buying by foreign institutional investors (FIIs), domestic institutional investors have turned sellers. (Historically, DIIs have mostly remained sellers when FIIs have bought into Indian equity.) Selling by DIIs in March so far has been the highest in over a year. According to BSE data, after last January’s net selling of ₹7,880 crore, DII selling stood highest this March so far at ₹4,470 crore. On the other hand, after being sellers in January and February, FIIs are back with net buying of ₹7,745.74 crore — the highest since October.
Despite the Nifty 50 posting a smart 7 per cent recovery post-Budget, it is still down 6 per cent year-to-date.
Year-end phenomenon Prior to the Budget, Nifty-50’s year-to-date return showed double-digit negative returns.
The current offloading by the DIIs is largely the result of selling pressure triggered by mutual funds and weak inflows into equity MFs. An equity dealer said LIC, along with some of the top private insurance companies in the country, have been selling in the market. The reason is partly a year-end phenomenon as well as profit-booking.
According to data provided by the Association of Mutual Funds in India, the industry’s equity assets under management (AUM) dropped to ₹3.18 lakh crore in February from ₹3.45 lakh crore in January, the lowest since April 2015.
Consistent fall Inflows into equity and related schemes have been consistently falling since December. February inflows at ₹2,522 crore remained lower than January’s ₹2,914 crore.
The average monthly inflow into equity MFs stood at ₹7,550 crore in 2015.
Flocking to tax-free bonds Also, there have been tax-free bond issues and offers-for-sale, which may have led to redemptions or weak inflows. Tax-free bond issues from HUDCO, NHAI, Nabard and IRFC have been successful. Besides, the Centre divested stakes in NTPC and Container Corporation of India, to subscribe to which investors (including DIIs) would have sold their current holdings, thus adding to the selling pressure.
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