Domestic institutions hold fort even as foreign investors shun equity
Mutual funds and insurance companies continue to hold fort at the equity market and manage to prevent a sharp fall even as the foreign portfolio investors (FPIs) are dumping their investments.
FPIs have been withdrawing significant investments from the Indian market as the uncertainty over the US election settling and business-friendly President Donald Trump taking over the mantle.
Continuing the ‘Exit India’ strategy, FPIs have pulled out over $10 billion in January, marking one of the largest monthly outflows since the disruptions of March 2020 and October 2024. In January, FPIs had pulled out ₹87,375 crore from equity market.
In contrast, domestic institutions, including mutual funds and insurance industry, have made a net investment of ₹86,592 crore and absorbed most of the selling pressure to prevent a large market rout.
Trivesh D, COO, Tradejini, said despite the recent fall in equity markets, retail investors are sticking with growth-focused strategies and using SIPs to average out costs for building long-term wealth.
The inflows through SIPs has touched a new high of ₹26,459 crore, especially into mid-cap funds, showing that investors are not shying away from risk even in a volatile market, he said.
Despite all the negative news and market volatility, the asset under management of the mutual fund industry had touched ₹67 lakh crore and has jumped 32 per cent year on year, which shows resilience of this industry, he added.
This apart, the insurance industry is also launching newer goal-based insurance products with equity investment akin to new fund offers of the mutual fund industry.
Tata AIA Life Insurance launched ‘Shubh Muhurat,’ a life insurance solution which guarantees capital with equity exposure. It comes along with certainty of benefits to the desired beneficiary, life cover, immediate death benefit and more to help parents save for their child’s dream wedding.
FPI’s greener pasture
The continued selling by FPIs was due to several global and domestic factors including a weaker rupee, rising US bond yields and expectations of a weak earnings season for Indian companies.
Despite recent drop in key indices, the high valuation of Indian equities persists. This combined with macroeconomic challenges has made foreign investors cautious. Additionally, corporate earnings in the last three quarters have fallen short of investor expectations, further dampening sentiment. Consequently, both the Sensex and Nifty have dropped 1.47 per cent this month alone.
