You're invited to try out the new version of Value Research Online. Click here to begin:

FPI vs Mutual Funds - Changing times

Who buys when deep-pocketed foreign investors sell?

  • TweetTweet
  • LinkedinLinkedin
  • FacebookShare

Increased tax surcharge on foreign portfolio investors, the fear of escalating global trade war, a downward revision of GDP growth by the Reserve Bank of India (RBI) and a rapid decline in auto sales have sent the Indian equity market sharply lower from its all-time high since the budget. This fall is also largely attributed to heavy selling by foreign investors (FPIs) selling. Since July 2019, FPIs have sold stocks of around Rs 25,000 crores. However, it is not happening for the first time in the history of the Indian market. In 2008, foreign investors sold shares of more than Rs 1 lakh crores, while in 2018, they sold shares worth Rs 73,000 crores. As investors, we often tend to panic as soon as FPIs start selling. However, we should remember that this will not shut the market overnight and that they still hold a significant chunk of the market (21.6 per cent of the market worth Rs 26.2 lakh crore as of July, 2019).

Subscribe to the free Value Research Insight newsletter

But the major difference between 2008 and 2019 is the ever-increasing presence of mutual funds, specifically since 2015. Since July 2019, they have bought shares of more than Rs 30,000 crores. Unlike those times when FPI sat in the driver's seat of the Indian market, mutual funds have started gaining size and dominance. However, still, the market follows the direction of FPI's flow but this trend is gradually witnessing a reversal. Since 2015, mutual funds have invested three times the total foreign investors flow in the last 10 years. The following tables depict reversal of the trend in mutual fund flows since 2015.

Are you missing an opportunity to invest in great stocks at low valuations? There are thousands of listed companies in India and yet only a handful that are worth investing at a particular time and at a particular price.

Our equity team has sifted through hundreds of companies and selected stocks that you should invest in. This list now has 37 stocks on it, and new ones are being added every month. Thousands of our members are using stagnant equity markets to buy great stocks at low prices. Membership of Value Research Stock Advisor is available at a 40% to 60% discount. Learn more and become a member

comments powered by Disqus