Foreign institutional investors seem to have turned cautious after the imposition of long-term capital gain tax in equity investments in the Union Budget.

An unfavourable global scenario has also resulted in global sell-off and hence the intense volatility in the Indian markets over the last few trading sessions.

Foreign institutional investors, who were net buyers in the Indian equity markets to the tune of $7.77 billion in 2017 and a further $2.06 billion in January 2018, have turned net sellers in February so far (till February 12) for around $0.81 billion according to data provided by Morningstar India.

“Most of this selling has happened in the last five trading sessions,” it pointed out. On the other hand, domestic institutional investors have continued their buying spree and provided strong support and stability to the stock markets. So far in February, they are net buyers in Indian equities to the tune of $1.05 billion (approximately) after a marginal selling of $0.11 billion. Except March, DIIs were net buyers in every month in 2017. They bought shares worth $14 billion — almost double the amount of FIIs in 2017.

Reduced dependence

“The increasing participation of DIIs, compared to FIIs, reduces the dependence on foreign money giving the much-needed stability to the markets which is desirable. In addition to that, not only Indian managers, but also investors have started seeing market corrections as an investment opportunity,” Morningstar India said.

This only points to the fact that Indian equity markets are getting matured.