Domestic investors, both institutional and retail, have been demonstrating their growing influence in the Indian stock markets for quite some time even as their foreign counterparts have been selling shares in huge quantity in the last few trading sessions.
This has not gone unnoticed by a large section of the market. In a post on social media platform X, Abhisar Jain, a fund manager at Monarch AIF shared data related to the flows between September 30 and October 4 and said, “All the punches thrown by FIIs are being countered by Domestic Investors....This vote of confidence is truly remarkable!”
FPIs have been aggressively offloading stake, especially on days of extreme market volatility. Between September 30 and October 4, FIIs sold shares worth around Rs 39,964 crore, with the most significant selling witnessed on October 3, when they were net sellers at Rs 14,854 crore, according to data shared by Monarch AIF.
Domestic investors, particularly mutual funds, however, counterbalanced this with strong buying as mutual funds were net buyers at Rs 27,893 crore.
Other categories of domestic investors also showed confidence in the market despite external selling pressures. During the period, they picked up shares worth around Rs 11,633 crore. Insurance companies also contributed to the buying, with net purchases totalling Rs 1,859 crore.
Banks and Portfolio Management Services (PMS) were also net buyers, picking up shares worth Rs 723 crore and Rs 169 crore, respectively.
In a recent conversation with Moneycontrol, Nirav Karkera, Head of Research, Fisdom had said that the DIIs’ ability to absorb the selling pressure reflects their confidence.
“They are not waiting for deeper discounts, they are buying at current levels, even as FIIs sell. This shows conviction and liquidity on the domestic front, which helps stabilise the market in the face of external shocks,” he said.
In a comment to the media in September, Venkat Chalasani, the AMFI CEO, had noted that as mutual funds remain a key stabilising factor for the equity market in India, their commitment towards transparency and excellence remains resolute.
Most market experts continue to remain positive on the stability of the Indian market on the back of strong support from domestic investors, highlighting that India's dependency on FIIs has reduced over time.
Kotak AMCs Harsha Upadhyaya believes that fifteen years ago, India was heavily dependent on foreign flows but that has changed now.
“If something had gone wrong, foreign investors would have completely moved out of India, shifting their focus to markets like China, which had a much larger weightage," Upadhyaya said while adding that today India is second only to China in weightage within the MSCI Emerging Markets Index and this makes it difficult for foreign investors to ignore India entirely.
While there continues to be bouts of FPI selling, on an overall basis FIIs continue to find India attractive. In September, FIIs were net buyers at $6.9 billion – the highest monthly net flows since December 2023. In October, however, they have been net sellers at nearly $6 billion till October 9.
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