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Over the past few days, the Sensex has dropped by over 3,300 points. This big fall happened in just four trading sessions because Foreign Institutional Investors (FIIs) took out about Rs 32,000 crore from India’s stock market. The main reasons they pulled out are that they are finding the Chinese markets more attractive right now, and recent tensions between Iran and Israel have made them nervous.
While many investors worry that the market might fall even more in the coming days, there is hope that the drop won’t last too long. India has a strong economy, a large pool of domestic investors, and many people putting money into mutual funds every month through SIPs (Systematic Investment Plans). These things might help keep the market from falling too much.
An interesting fact is that mutual funds in India are holding a lot of cash right now. As of August, they had around Rs 1.86 lakh crore in cash, which is their highest level in five years. Large equity mutual funds, of which each valued at least $1 billion, have about 5.39% of their portfolios in cash.
Rahul Sharma from JM Financial Services said that foreign investors were a big reason why the market was doing well recently, but now, Indian investors will have to step in to support it. Recently, FIIs had one of their biggest single-day exits, selling stocks worth Rs 15,243 crore. On that same day, domestic institutions (DII) made their biggest single-day purchase, buying stocks worth Rs 12,914 crore. This shows the strength of Indian investors, who are ready to buy stocks when foreign investors sell.
Another important point is that Indian retail investors, which include ordinary people and households, are just starting to invest in stocks. Right now, about 5% of Indian household savings are in the stock market, and a large portion of savings is still in bank deposits, which earn low returns. But as India’s middle class grows, more and more people are entering the stock market to find better returns. Many of these new investors use SIPs to invest a part of their monthly salary in mutual funds. Mutual funds are growing quickly, with assets increasing by over 40% each year.
Nilesh Shah from Kotak Mutual Fund advises investors to look for quality stocks instead of just following what’s popular.
In short, while foreign investors are pulling back, India’s strong economy and the growing interest of Indian investors might keep the market steady.
Thank you.
Regards,
Kautilya, IBS Mumbai.
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