Domestic investors take recourse to Indian stocks as foreign investors flee – Times of India

New Delhi: Foreign investors have been reducing their stake in Indian equities over the past few months, but domestic mutual funds, banks and insurance companies have helped bring down the market with their buyouts.
According to data from the National Stock Exchange of India, foreigners sold $7.24 billion between October 1 and January 25, but domestic Indian institutions bought $9.63 billion in that period.
Analysts said the rise in domestic investments was due to increased retail interest in equity markets as the country’s young investors choose stocks over other traditional assets.
Harald van said, “People start seeing increasing income and investing more money for their future and there is a greater desire to have assets like equity. A few decades ago most people only saved in cash, jewelry or gold and property used to do.” Der Linde, HSBC’s Chief Asia Equity Strategist.
“Therefore, we see a constant buyout from retail investors. They buy ETFs, funds and even pick stocks themselves.”
Data from the Association of Mutual Funds in India shows that 328 billion Indian rupees ($4.38 billion) were raised through systematic investment plans (SIPs) in the fourth quarter of 2021, up 40% from a year ago .
SIPs are more popular among retail investors because they allow them to invest a fixed amount regularly, and their returns are less volatile than lump-sum discretionary stock investments.
This domestic support could protect Indian markets from global volatility as the US Federal Reserve prepares to raise interest rates sharply in an effort to tackle high inflation.
Several emerging market stock indexes have tumbled over the past few weeks as foreigners aggressively sold riskier markets, while chasing higher US yields and preparing for a hit on earnings.
However, India’s Nifty 50 index is down just 2% so far this month, while the MSCI Asia-Pacific index is down 5%.
Some analysts said India’s high stock valuations may deter foreign investors, but domestic investors will continue to hoard shares.
According to data from Refinitiv, the 12-month forward price-to-earnings ratio of India’s large and mid-cap stocks stood at 20.1, the highest in Asia.
Manishi Raychaudhuri, Asia-Pacific Equity Strategist at BNP Paribas, said, “It is difficult to find alternative assets to hedge inflation in India, which, we believe, explains investors’ preference for equities.”
“This situation is unlikely to change in the medium term, meaning that domestic institutional investment flows may continue to be an impediment to the market.”