Updated on 11 Jan 2017
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The buying and selling by FII and DII in 2016
The equation is changing on Dalal Street. In recent time, domestic institutional investors (DII) have made more money by buying stocks whenever FII (Foreign Institutional Investors) have dumped them.
After pulling out over Rs 30,000 crore from the domestic equity market during the December quarter, foreign portfolio investors (FPIs) pulled out close Rs 1,600 crore from Indian equities in the first three sessions of the New Year 2017, NSDL data showed.
Often, FIIs offload stocks in panic or to simply rebalance their portfolios or shift money to a more attractive market or manage redemption pressure, which is when then create opportunity for retail investors to lap up such stocks.
For instance, FIIs pulled out money from most emerging markets last year, and India was no exception.
In recent times, FII selling has got triggered by uncertainty over the US presidential election and prospects of hawkish policies from the US Federal Reserve, which have turned US assets more rewarding.
Rising strength in the US dollar, which is trading near its 14-year peak, led to a sharp drop in domestic currency, shrinking profits in FII portfolios and forcing them to book profits.
The domestic institutional investors (DIIs) smelt this opportunity way back. All through last calendar year, even as the FPIs went on a selling spree, the DIIs bought those stocks in every dip to make a killing. The following two charts illustrates this trend of FII selling and DII (mostly Mutual funds) buying in 2016
As per NSDL data, during calendar year 2016, FIIs poured Rs 20,568 crore in the equity market, but took out Rs 43,647 crore from the debt market. They have been net sellers in the Indian equity market over the past four months, including January 2017.
The buying and selling of FII for the year 2016 is as shown in below table
Over the years, Indian retail investors have become more aware of equity as an asset class. The good part is that they have not liquidated their holdings in panic, which has created room for mutual funds to make purchases at lower levels.