Despite incessant selling from foreign portfolio investors over the past six months, the Indian equity market has fallen merely 6 percent from its record highs hit in October. The resistance of the domestic stock market can be credited solely to the strong inflows from retail investors through direct investing and mutual funds.
Foreign investors net sold close Rs 1.5 lakh crore worth of domestic stocks between October and February. Domestic mutual funds net bought stocks worth Rs 77,634 crore, while retail investors directly invested 97,500 crore during the same period, data compiled by Moneycontrol showed.
Brokerage firm Kotak Institutional Equities believes that the flows from FPIs and retail investors reflect their divergent views on the Indian market.
“FPIs perhaps expect low returns from the market and are acting on their negative ‘expectations’ by selling aggressively,” the brokerage firm said in a note on March 30. The turn in sentiment on Indian equities for FPIs was driven by expensive valuations of the so-called growth stocks, and surging global bond yields.