Coronavirus impact: FIIs pull out over $8 bn shares from Feb 24, but DIIs lent support

The large amount of selling by foreign institutional investors for nearly a month due to recession fears after rapid wide-spreading novel coronavirus in Europe and United States was one of the biggest reasons for equity market correction.

FIIs net sold Rs 20,908 crore worth of shares in the week ended March 20, taking the total to Rs 51,243 crore in March so far. It was the biggest ever monthly outflow.

They also pulled out more than Rs 52,000 crore from debt market in the month so far. As a net net, they withdrew more than Rs 1.03 crore from India.

They have consistently been net sellers to the tune of Rs 62,611.82 crore from February 24, which was over USD 8 billion in dollar terms (at 75.20 per dollar rate).

It clearly indicated that investors are more worried about the impact of virus on global economic and earnings growth in the quarters to come as most of countries are either in a partial or full lockdown mode for few weeks to limit the virus spread. Hence, FIIs want to stay in a safety mode by cashing in at whatever price available.

"The issue at hand is that all major global economies are either in shut-down mode or heading there. This has led to a flight to safety. Equity markets are heading southwards and bond yields are rising across geographies," Manish Jain, Fund Manager - Coffee Can PMS at Ambit AMC told Moneycontrol.

However, domestic institutional investors provided a good support to the equity as they net bought Rs 60,146.77 crore of shares from February 24, including Rs 44,160.95 crore of buying in March so far. DIIs inflow was also the biggest in a single month.

"Most FIIs price their risk globally. Unlike them, the Indian DIIs are only focused on investing in India. The other reason for buying by DIIs is that a lot of people add money to their mutual funds when the markets dip. That is why we generally see a contrasting behavior between FIIs and DIIs during period of high volatility," Raghvendra Nath, Managing Director of Ladderup told Moneycontrol.

He said India has one of the largest equity markets in the world and is extremely well regulated. "The FIIs have no option but to remain strategically invested in India."

Indian equity benchmarks Sensex and Nifty fell over 12 percent for the week gone by and lost nearly 28 percent in the previous month, following turmoil in global peers as virus gripped equities.

"Needless to say, global cues and developments on the coronavirus front would dictate the market trend ahead also. We reiterate our advice limiting leveraged trades and utilising this phase to accumulate quality stocks," Ajit Mishra, VP - Research, Religare Broking told Moneycontrol.

The total infected cases by novel coronavirus crossed 3 lakh mark globally with around 13,000 fatalities. Italy, Spain, Iran and United States were the worst hit outside of China.