At a time when jittery foreign investors continued to pull out from Indian capital markets, domestic institutional investors, led by mutual funds, came to rescue, despite concerns over inflation, economic growth and supply chain disruptions globally after the Russia-Ukraine crisis.
Data shows domestic institutional investors (DIIs) have invested over Rs 2 lakh crore so far in the Indian stock market in 2022, while foreign institutional investors have taken out Rs 1.75 lakh crore during the first five and a half months of this fiscal. With still six-and-a-half months to go in the year of 2022, investments by DIIs in the equity market is the highest ever in a single calendar year.
With markets on downward spiral, domestic investors saw this as an opportunity and took advantage of the correction in the market. Globally, investors have been feeling the heat of rising inflation, surging crude oil prices and geopolitical tensions.
“Domestic flows are coming to the market as people are shifting from physical assets and investing heavily in financial assets. The number of demat accounts and mutual fund investors have grown manifold in the past couple of years. Rising interest rate always poses a risk to equity investment to some extent. It may (negatively) impact a small portion of SIPs (systematic investment plans), going ahead. However, India’s growth story remains intact, and we expect Indian equity to deliver double-digit returns over the next one to two years. Therefore, domestic inflows will remain strong,” said Mitul Shah – Head of Research at Reliance Securities.
Indian households save about Rs 53 trillion annually, and at the current rate of equity allocation in household savings (4.80 percent), the incremental annual equity allocation works out to Rs 2.52 trillion, According to a Jefferies India report. Of this, the annual contribution through SIPs in mutual funds alone stands at over Rs 1.44 trillion, it added.
