DIIs invest over Rs 2 lakh crore in record 96 sessions

Domestic institutional investors have net bought over Rs 2 trillion worth of shares so far in 2024

Domestic institutional investors (DIIs), which include mutual funds, banks and insurance companies among other entities, have been aggressive buyers in the stock market in the recent past with the quantum of their net buying already crossing the Rs 2 lakh crore mark so far 2024.

This is only the second instance of DIIs registering such huge inflows in a single calendar year – after 2022 – though it has been a new record this year as it took only 96 trading sessions to touch the Rs 2 trillion mark.

While DIIs have been consistent net buyers in the current calendar year, the buying activity picked up in the last three months with March witnessing Rs 56,356 crore inflows followed by Rs 40,720 crore and Rs 45,000 crore in April and May.

In the current calendar year, DIIs took 57 sessions to pump in the first trillion and followed it by another trillion in a mere 39 trading sessions.

Interestingly, the strong buying by DIIs have largely helped the market offset any significant impact of the selling by their foreign counterparts who have been net sellers at $2.89 billion in the current calendar year.

Vinit Sambre, Head of Equities at DSP Mutual Fund attributes the inflows to expectations of a stable government after the elections and continued momentum in earnings.

In a similar context, Swarup Mohanty, Vice-Chairman and CEO of Mirae Asset Investment highlighted the fact that inflows through systematic investment plans have risen to around Rs 20,000 crore per month while adding that employment provident fund organisation, PMS, AIF, insurance companies and lumpsum investments into mutual funds could easily account for another Rs 30,000-Rs 32,000 crore per month.

Mohanty further believes that going ahead there will be a significant change in the role of DIIs on the back of continued growth in equity culture and SIP investments and expects monthly SIP inflows to hit Rs 25,000 crore by December.

Meanwhile, Elara Capital, while highlighting the strong buying by DIIs in the last three years, believes that it is primarily being led by active retail investors who are coming to the markets through the SIP route.

The broking major believes that this shift marks a new era in India's market dynamics since CY15 as domestic flows have been consistently surpassing those of FIIs.

The transition of savings from physical assets to financial ones has solidified domestic flows and despite global uncertainties, inflation, and interest rate challenges in 2022 – causing FIIs to withdraw $17 billion -- the Nifty corrected only by 6% that clearly showed the resilience of domestic flows, it said while adding that the shift has also reduced overall market volatility, with a 29 percent decline in average volatility since CY15.

There is, however, a contrarian view as well as a recent Jefferies report warned of rising risks of a reversal in domestic fund flows.

The report highlighted that the share of equity flows in financial savings has exceeded the decadal average, with less than half of these flows being predictable.

The report titled ‘Is $7 bn/month sustainable?’, underscored the staggering domestic equity inflows of $7 billion per month in 2024, twice the previous high and over three times compared to a year ago.

The report suggested that if domestic flow reversal leads to a dip in large-cap holdings, foreign portfolio investors (FPIs) may intervene to limit the downside in this segment, the Jefferies report added.

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