FII vs DII and the difference in sentiment


Hi folks,

2020 was an odd year to say the least, it was like no other year in the living memory for most of us. But as 2020 ended, we look back at the markets once more, and they behave unpredictably like almost everything else in 2020.

The Nifty50 saw 7500 levels in the fall of March’20 and highs of almost reaching 14000 as we are writing this blog. In the rather new scenario, of fall and rise, new investors entered the markets and old investors fled(well not all of them but quite a few). Similarly, some companies struggled to adapt while others say record highs in their prices.

The FII Bonanza:

In March 2020, foreign institutional investors (FIIs) pulled out of the indian markets Rs 58,000 crores. Now that was a BIG big fall, but what followed next was even bigger, the indian markets were now staged to see one of the fastest rises in the equity markets ever, i.e the FIIs pumped more money into the Indian Stock Markets than ever before!

Infact, lots of Southeast Asian companies saw FIIs inflows. Foreign investors bought $17.5 billion (Rs 1.2 lakh crore) in Southeast asian equities in November. This was the Highest Monthly FII purchase since 2008. For India, even during the market uncertainty in October’2020, due to the U.S. Presidency Elections, India was the only southeast asian country that continued to see foreign investments worth more than Rs 14,000 crores.

One reason the FIIs invested such large amounts into india was because the MSCI increased its weightage of Indian stocks from 8.1% to 8.8% in its emerging market index.

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FII inflows continued in the month of December, with more than Rs 48,000 crores of indian equities bought in the month, most of which went into banks and NBFCs.

The DII Scare:

On the domestic front, the DIIs did not share the same sentiment as their foreign counterparts, instead, domestic investors were pulling money out in droves.

 

Data for the month of November from the AMFI revealed that equity mutual funds saw net redemptions of a little over Rs 12,900 crore.

In 2020, from April to September, 63 lakh new demat accounts were opened which is a considerable increase against the corresponding period last year. Which leads to the conclusion that many invetors preferred to participate directly in the equity market as opposed to participating through mutual funds.

Bottom Line:

As you read this blog, January is midway, FIIs have continued to pour in money (Rs 6,000 crores)for the first week of January and DIIs have continued to pull out of investments to the tune of Rs 2,300 crores.

Only time will tell if these levels are sustainable in the market, or maybe time has already showed its cards as you read this? Depends on when this blog is up!


 

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