Rajalakshmi Sivam
BL Research Bureau
Domestic mutual funds and insurance companies which had a strong hand in the market rally post-elections seem to have turned cautious of late. Domestic institutional investors have, for the first time after May, turned net sellers in the stock market this month. In the 13 trading sessions in October, domestic institutions have taken out over Rs 2,600 crore on a net basis. This is the largest single month withdrawal since January 2008.
In fact, the pessimism of domestic institutions seems to be shared by retail investors, with the latter taking out money as well. The markets have been rising mainly on the strength of FII inflows of Rs 4,224 crore on a net basis, so far this month.
Domestic institutions had been pumping fresh money into the markets for the last four months putting in Rs 14,207 crore in total, unmindful of how FIIs behaved. Even in July when FIIs withdrew Rs 1,365 crore from the market, domestic institutions were investing and helped the Sensex close 8 per cent higher, by bringing in over Rs 5,800 crore.
But the situation has changed in recent weeks. From the average Rs 4,000 crore brought in every month between June and August, domestic institutional investment in the market in September dipped to Rs 770 crore and turned to net sales in October.
Retail investors haven’t participated in the market’s rally since March and have pulled out Rs 13,355 crore (net) between March and now. Even in the post election surge that took markets up in May, retail investors didn’t join in. In September they took Rs 4,285 crore out of the market and in October till date they have pulled out Rs 462 crore.
It needs to be mentioned that retail participation in recent IPOs has also been lukewarm, with even the over-subscribed Indiabulls Power offer seeing its retail portion subscribed just over one time.
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