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Last Updated : Jan 08, 2020 01:05 PM IST | Source: Moneycontrol.com

'Institutional investment of 2019 gives a strong green signal for 2020'

In a time of currency volatility or risk-off environment, the increasing share of long-term institutional investors are expected to provide greater depth to the Indian market and ease redemption pressure.

Moneycontrol Contributor @moneycontrolcom
Representative Image
Representative Image

Gaurav Garg

In terms of India's political and economic climate, 2019 was very dramatic. Sectors like real estate and autos were badly hit, because of the decline in NBFC funding. There was also a beating in demand for consumer goods. Overall, the economy took a downturn and India’s GDP dropped to a six-year low of 4.5 percent in quarter-2 of fiscal year 2020.

Despite all these factors, in 2019, Rs 1.43 lakh crore (approximately $20 billion) was invested in total by domestic institutional investors (DIIs) and foreign portfolio investors (FPIs). This amount is said to be the highest in one calendar year in over fifteen years. In 2018, this figure was below Rs 80,000 crore.

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The 2019 institutional inflow of funds has been calculated to be as much as the double of the fifteen year's average, out of which FPIs contributed almost two-thirds of the capital, while the remainder was put together by local funds.

In a time of currency volatility or risk-off environment, the increasing share of long-term institutional investors are expected to provide greater depth to the Indian market and ease redemption pressure.

Although, experts are expecting moderate returns from the markets in 2020 amid elevated valuations and a possibility of continued economic slowdown, these numbers are still shocking. While the economy may not appear to be on track in the near future, these investment numbers strongly indicate institutional investors' positive outlook for Indian markets.

Markets can do much better with such acquisitions, while it is already at all-time high. These statistics show that Indian markets are being issued a green signal by institutional funding and economic slowdown is being considered as cyclical in nature.

The 2020 Budget is the reason why analysts are willing to bet on the Indian economy. With the investors being less risk-averse to mid and smallcap stocks with steady turnaround in the economy, the year is also likely to mark a shift in focus to the wider market.

(The author is Head of Research at CapitalVia Global Research Limited- Investment Advisor.)

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Jan 8, 2020 01:05 pm
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