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Domestic institutions not part of FPI-led bull rally

Domestic institutions, domestic stock markets, domestic institutional institutions, foreign portfolio investors, FPI bull rally, indian express, indian express news

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When the domestic stock markets on Tuesday hit another record high, domestic institutional institutions (DIIs) were sellers, refusing to join the buying euphoria. While foreign portfolio investors (FPIs) bought stocks worth Rs 2,134 crore, DIIs made net sales of Rs 785 crore during the day.

Unlike FPIs, domestic institutions (DIIs) led by LIC, insurance companies and mutual funds are not very active in the ongoing bull run. On Monday, FPIs invested Rs 1,995 crore but DIIs pulled out Rs 337 crore. Aided by FPI buying, the Sensex soared by 274 points, 0.42 per cent, to a record high of 65,479.05 and the NSE Nifty soared by 66 points to 19,389 on Tuesday.

According to NSDL data, foreign investors invested around Rs 60,000 crore in April-June period of 2023. However, DIIs invested just Rs 3,368 crore during the period. That was the period when markets rose by over 10 per cent amid the easing of inflation and the RBI decision to keep interest rates steady.

DIIs, who were big buyers when the market was down in the second quarter and fourth quarter of FY2022-23, are now sellers on many days. In the last quarter (January-March) of FY 2023, DIIs had bought stocks worth Rs 83,000 crore while FPIs sold stocks worth over Rs 50,000 crore. “Domestic institutions are contrarians. They buy when other big operators like FPIs sell… and sell when FPIs and others buy. They have made good profits through this strategy,” said a fund manager.

LIC, the largest investor in the stock market, normally sells stocks when the market soars to new peaks. “We sell when others buy, and buy when others sell. LIC has been making consistent profit from its market operations in the last several years. LIC is a long-term investor in the markets,” said an official.

“Clearly, DIIs are sitting on a good profit on investments made by them in the last quarter of FY2023. They are not accumulating stocks at high levels. Ideally retail investors should follow the investment strategy being followed by DIIs. Then they won’t make losses,” said a market analyst. There’s a perception in the market that the stock markets are entering into an overbought zone with valuations hitting new highs. If there’s a major correction, DIIs won’t get any major impact while FPIs and retail investors – normally aiming at making a fast buck — who invest at high levels, will suffer losses.

The FPI sell-off of Rs 1.21 lakh crore in calendar year 2022 was absorbed by DIIs to a great extent, preventing a major crash in the markets since March 2022. A global risk-off sentiment amidst increased risks to global growth contributed to the decline in global equities including India. There were domestic factors at play as well, including high inflation and rising interest rates. Inflows into mutual funds, however, remained robust, as investors turn risk-averse.

Despite huge volatility in stock markets and sustained selling by FPIs, equity mutual funds have been attracting inflows. Significantly, inflow through SIP (systematic investment plan) stood at an all-time high of Rs 14,748.68 crore in May, indicating that retail investors continue to hold confidence on equity investments.

Mutual funds have assets worth Rs 16.56 lakh crore in equity-oriented schemes as of May 2023. The combined strength of MFs, LIC and other insurance companies like New India Assurance can neutralise the impact of FPI buy or sell operations. FPIs are considered as “hot money” which can exit Indian markets faster than they entered.



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54% fall in fund raising via initial public offering market

54% fall in fund raising via initial public offering market

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With the stock markets going on a roller-coaster ride in 2022, fund mobilisation by companies through the initial public offering (IPO) market declined 54 per cent.

Amount raised:

Total issuances this year remained lower at Rs 55,472 crore as compared with Rs 1.22 lakh crore issued in 2021 as companies and promoters became cautious in the wake of volatility in the stock market. Promoters and companies turned cautious in 2022 as many high-profile IPOs of 2021 like Paytm, FSN E-commerce (Nykaa), Nazara Technologies, PB Fintech, CarTrade Tech, Easy Trip Planners, Aditya Birla Sun Life AMC and Fino Payments disappointed investors with their share prices falling steeply below their IPO prices.

3 active sectors:

Overall, IPOs issued have been concentrated in 3 major sectors (contributing to 56 per cent of the total issuance); edible oil, insurance and hospital & healthcare services. While the edible oil industry has performed very well on the stock market, the insurance industry (LIC) has taken a hit, while returns in the healthcare services industry are modest at best, according to a Bank of Baroda research report.

LIC biggest:

In the current year, 12 industries witnessed big ticket (Rs 1,000 crore plus) IPOs, of which the insurance sector (LIC) was the biggest with an issue size of Rs 21,000 crore. This was followed by industries such as edible oil (Rs 7,000 crore), hospital & healthcare services (Rs 3,200 crore), textile (Rs 3,100 crore) and courier services (Rs 3,000 crore), among others, BoB report said.

LIC’s market valuation fell by a whopping Rs 1.83 lakh crore to Rs 4.16 lakh crore as on December 23.

Listing at discount:

Out of 12 big ticket issuances, 5 were listed at a discounted price, averaging -5.3 per cent. LIC (-8.6 per cent) and Rainbow children’s Medicare (-6.6 per cent) were listed at a discount of even more than average. On the other hand, 7 companies were listed at a premium, averaging 13.5 per cent. Amongst these, Patanjali foods (30.8 per cent), global health (18.5 per cent), and campus activewear (21.6 per cent) recorded a premium above average, BoB said.

Out of a total of 84 companies (versus 99 last year), 17 per cent companies listed at a discount, 6 per cent companies were listed at the same price as the issue price, while 77 per cent companies listed at a premium.

32 pc trading at discount:

As on December 18, 2022, out of 84 companies, 32 per cent of the companies are trading (last price) at a discount (compared with issue price), while 68 per cent of them are still trading at a premium. Overall, these companies have recorded an average return (last versus list price) of 17.7 per cent in CYTD22, versus 7.6 per cent gains made by Sensex, BoB report said. “High IPO premium charged by some companies has led to investors burning their fingers as these shares crashed after listing on the stock exchanges,” said a fund manager.

Top performers & losers

The top performing companies include: Rhetan TMT, Jayant Infratech, Containe Technologies, Adani Wilmar, Veerkrupa Jewellers, Goel Food Products, Maruti Interior Prod, Sailani Tours N Travel, Venus Pipes & Tubes, and Ekennis Software Services, averaging return of 228 per cent.

Some of the stocks which gave negative returns this year included: Fone4 Communication. India, Safa Systems & Technology, EVOQ Remedies, Mafia Trends, Global Longlife Hospital, AGS Transact Tech, and Pace E-Comm Venture, averaging return of -50 per cent.



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‘Counterbalancing’ in Indian markets: Domestic investors buy as FPIs sell

domestic institutional investors (DIIs), Foreign Portfolio Investors, Domestic stock markets, Indian stock market, Bombay Stock Exchange (BSE), Bombay Stock Exchange Sensex, Business news, Indian express business news, Indian express, Indian express news, Current Affairs

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As FPIs continued to pull out funds from Indian equities in the quarter ended June 2022 amid rising inflation, interest rates and concerns over global growth, their share in NSE-listed companies fell to a 10-year low of 19.2 per cent.

In the same period, however, domestic institutional investors (DIIs), who continued to invest in Indian markets, raised their holding of Indian equities to an all-time high of 14.06 per cent.

According to data collated by primeinfobase.com the domestic retail holding (individuals holding up to Rs 2 lakh) also stood strong in April-June despite the Sensex witnessing a fall of nearly 15 per cent in the quarter from its closing on March 31, 2022. The retail share in National Stock Exchange (NSE)-listed entities stood at 7.4 per cent at the end of June, marginally lower over its highest share of 7.42 per cent seen in the quarter ended March.

“This further showcases the rise of domestic investors and the huge counterbalancing role they have played to foreign investors. To also put this in perspective, as on March 31, 2015, FPI share was 23.30 per cent while the combined share of DII, retail and HNI was just 18.47 per cent. The combined share of DII, retail and HNI now stands at an all-time high of 23.53 per cent,” said Pranav Haldea, managing director, PRIME Database Group.

During the quarter, while net outflows from FPIs stood at Rs 1,07,340 crore, net inflows from DIIs amounted to Rs 1,28,277 crore. The data shows that the gap between FPI and DII holding decreased to its lowest level in this quarter as DII holding is now just 26.77 per cent lower than FPI holding. (On March 31, 2022, DII holding was 31.99 per cent lower than FPI holding).

The FPI to DII ownership ratio too fell to a new low of 1.37 as on June 30, from 1.47 as on March 31. Over a 13-year period (starting June 2009), while FPI share has increased from 16.02 per cent to 19.2 per cent, DII share has risen from 11.38 per cent to 14.06 per cent.

The share of domestic mutual funds in companies listed on the NSE rose for the fourth quarter running and reached a 2-year high of 7.95 per cent as on June 30, 2022, up from 7.75 per cent as on March 31, 2022. This was after five quarters of consecutive decline from March 31, 2020 (7.96 per cent) to June 30, 2021 (7.25 per cent). The share has grown on the back of net inflows by domestic mutual funds of Rs 73,857 crore in the June quarter.

LIC’s share (across 286 companies where its holding is more than 1 per cent) rose to 3.92 per cent as on June 30, 2022 from 3.83 per cent as on March 31, 2022. Share of high net worth individuals (HNIs) (individuals with more than Rs 2 lakh shareholding in a company) in NSE-listed companies also declined to 2.08 per cent as on June 30 from 2.21 per cent on March 31.

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While disclosure of holdings of FPIs by name is available only for holdings in a company greater than 1 per cent, Haldea said it is time for complete details of all their holdings to be made mandatory to be disclosed in India.

The share of the government (as promoter) in companies listed on the NSE saw a huge spike and reached 7.15 per cent as on June 30, from 5.48 per cent as on March 31. According to Haldea, this was primarily on account of the mega IPO of LIC.

The share of private promoters in NSE-listed companies declined to 44.33 per cent as on June 30, from 45.12 per cent on March 31.



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US rate hike fears spook markets

US rate hike fears spook markets

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The meltdown in the US markets on Wednesday on fears of aggressive interest rate hikes rattled domestic markets investors, with key indices plunging 2.61 per cent on Thursday. With the sell-off led by foreign investors sending the pivotals crashing, the benchmark Sensex plummeted 1,416.3 points to 52,792.23 and the NSE Nifty fell 430.9 points to 15,809.40.

The rupee, too, extended losses, falling another 10 paise to close at a record low of 77.72 against the US dollar on Thursday, weighed down by a negative trend in domestic equities and unabated foreign fund outflows.

Foreign portfolio investors (FPIs) pulled out another Rs 4,899 crore, taking the total outflows to Rs 42,836 crore in May. Domestic institutions bought stocks worth Rs 3,225 crore but failed to prevent the market slide. The Sensex has fallen 4,183 points in May alone. LIC shares fell by 4.05 per cent to Rs 840.75 as against the IPO offer price of Rs 949. RIL plummeted 2.35 per cent, SBI 2.24 per cent and TCS crashed 5.17 per cent.

Markets plunged sharply lower, pressurised by weak global cues. The meltdown in the US markets, on the fear of aggressive rate hikes, rattled investors and triggered a weak start. “The situation worsened further due to heavy selling in the index majors across sectors wherein IT and metal majors were among the top losers,” Ajit Mishra, VP – Research, Religare Broking Ltd.

The broader indices too traded in sync with the benchmark and lost in the range of 2.5-3 per cent.

Thursday’s fall indicates that bears are in control as the Nifty has completely reversed the recent gains and again reached closer to the March low. In this highly volatile market, investors can focus on sectors like FMCG, pharma, capital goods and manufacturing whose valuations are moderate and reasonable on a long-term basis, said Vinod Nair, head of research, Geojit Financial Services.

On Wall Street, key indices extended losses on Thursday as investors fretted over the impact of surging inflation on US economic growth and corporate earnings. At 2:32 pm ET, the Dow Jones fell 0.5 per cent to 31,318 while the S&P 500 dropped 0.2 per cent to 3,914.



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Rupee under pressure as FPIs rush to the exit door, pull out Rs 2 lakh crore since October

Rupee under pressure as FPIs rush to the exit door, pull out Rs 2 lakh crore since October

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The ongoing sell-off by foreign portfolio investors (FPIs) has led to withdrawal of over Rs 2,00,000 crore from the domestic stock markets since October last year. The Russia-Ukraine conflict has added to the nervousness of FPIs, already bracing for interest rate hikes by the US Federal Reserve. The FPI pull-out has hit the rupee, with its exchange rate against the dollar falling below the 76 level to 76.16 despite heavy RBI intervention.

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On March 4, FPIs pulled out Rs 7,631 crore from the stock markets, taking the total outflows to Rs 18,614 crore in the last three sessions of March as Russia intensified the attack on Ukraine and oil prices soared. This outflow has come after withdrawals of

Rs 45,720 crore in February and Rs 41,346 crore in January. With this, FPIs have pulled out

Rs 2,06,646 crore (excluding FPI investments in IPOs) since October 1, 2021.

If the situation in Ukraine worsens and FPI sales continue, the rupee will cross the 77 level against the dollar in the coming days, analysts said. While banks have been purchasing dollars to facilitate FPI pull-out, the RBI has been selling dollar from its forex kitty to salvage the rupee, said a banking source.

During the week ended February 25, India’s foreign currency assets declined by $ 2.228 billion. “The Russia-Ukraine conflict is hurting Indian rupee, bonds and equities via three channels: oil prices, US dollar Index and global equity prices,” said a Kotak Securities report.

Analysts said there could be a further temporary shock if things worsen more in Europe or, for that matter, a new front opens up in Asia. While the rupee is likely to remain under pressure, the RBI with its forex kitty of $631 billion will be able to prevent a big slide in the currency.

However, domestic institutional investors (DIIs), led by LIC, mutual funds and insurance companies, have been stepping up their purchases, absorbing most of the FPI sales. “There is a tug-of-war going on between FPIs and DIIs,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Countering the FPI strategy, DIIs have invested Rs 12,599 crore in March 1-4, adding to their total investments of Rs 1,42,872 crore since October 2021. DIIs invested a record amount of Rs 42,084 crore in February, their highest monthly investment since they put Rs 55,595 crore in March 2020 when Covid pandemic hit the country.

Despite a correction of around 13 per cent from the peak in Nifty, FPIs continue to sell since market sentiments have been impacted globally by the uncertainty triggered by the war and the surge in crude prices. This is likely to impact the IPO market and LIC’s plan for listing this fiscal and push up the current account deficit (CAD).

The Sensex has already fallen 5 per cent, or 2,899 points, to 54,333.81 since February 24 when the Russian invasion of Ukraine started. Global markets are spooked with the events happening in Europe, which are causing volatility. “FPIs have been sellers for almost 6 months now. Commodities are hitting highs across the board – oil, coal, metals and agri-commodities,” said Vineet Bagri, managing partner, TrustPlutus Wealth.

The FPI pull-out is dampening the sentiment in equity and forex markets. “Their impact on markets is visible, with increase in volatility and declining equity prices. However, the fact that this selling by foreign investors has been absorbed by domestic investors bodes well for the outlook of Indian markets,” Bagri said.

According to a Morgan Stanley report, supply constrained oil price rises are bad for India. Indeed, the recent 25 per cent jump in oil prices will expand the current account deficit by 75 bps and inflation by 100 bps on an annualised basis, it said.

US Federal Reserve Chair Jerome Powell recently said he will back a quarter point rate increase when the Fed meets March 15-16, putting to rest debate over starting a post-pandemic round of rate hikes with a larger than usual half-point increase.



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One in three IPOs this fiscal trading below its issue price

Initial Public Offering, BSE Sensex, Bombay Stock Exchange (BSE), stock markets, Domestic stock markets, Markets news, Business news, Indian express business news, Indian express, Indian express news, Current Affairs

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AT LEAST one in three initial public offerings (IPOs) this financial year since is currently trading below its issue offer price. In the past 10-plus months since April 1, 2021, in FY 2021-22, as many as 50 companies mopped up a record Rs 1,11,156 crore; state-owned Life Insurance Corporation too expects to mobilise over Rs 50,000 crore through an IPO this year itself.

During the same 10-month period, the benchmark sensitive index (Sensex) of the Bombay Stock Exchange gained over 16.5 per cent. BSE mid-cap and small-cap indices rose 18 per cent and 34 per cent, respectively during the period.

If investors in 18 companies out of 50 listed are sitting on losses, several others have generated only marginal gains. Of the 32 trading at a premium as on February 18, a dozen generated capital gains of up to 15 per cent which includes seven that have risen by up to 10 per cent, according to data compiled by The Indian Express.

Amongst the losers, investors in CarTrade Tech and One97 Communications (Paytm) suffered the maximum value erosion with shares trading over 60 per cent below their issue price. Even Zomato witnessed a sharp 36 per cent correction over the last one month; it is currently trading at Rs 86, which is 13 per cent over its issue price. FSN E-commerce (Nykaa) saw its share price fall from Rs 2,071 on January 17 this year to Rs 1,397 on February 18. The issue was priced at Rs 1,125. Data Patterns dropped from Rs 815 to Rs 652.20 during the same period.

The sharp fall must be seen in the context of a larger selling pressure in tech stocks. While the BSE Tech fell 8 per cent against the Sensex fall of 0.7 per cent since December 31, the Nasdaq has lost 13.4 per cent compared with the 6 per cent in Dow Jones.

Half-a-dozen IPOs are quoting at a premium of over 100 per cent and another six have returned between 50 per cent and 100 per cent capital gains since their listing.

The CEO of an asset management company said investors should be careful when there are many IPOs. “It is always seen that when the markets are on a high, IPOs tend to bunch up as companies hope to command a high premium. In such cases, promoters don’t leave much on the table for investors; they make the most,” said the CEO, who did not wish to be named.

The CEO further raised concern over the huge valuation demanded by new age technology companies and investor appetite. “If these companies could not make profit in lockdown when everything turned online, I am not comfortable with them when the economy has opened up,” he said.

The top ten gainers appreciated between 58 per cent and 273 per cent with Paras Defence and Space Tech topping the list with a gain of 273 per cent; its shares jumped from Rs 175 to Rs 654 after listing October 1, 2021.

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The top loser is CarTrade Tech which came out with an IPO at Rs 1,618 per share. This share is now trading at Rs 586, a discount of 63.8 per cent. Investors also lost in the high-profile IPO of Paytm. The company which offered its shares at Rs 2,150 is now quoting at Rs 833.9 on the exchanges. The market capitalisation of Paytm has crashed from the IPO valuation of Rs 1.5 lakh crore to Rs 54,057 crore as on February 18.

“The large size of Paytm’s IPO coupled with a complex business model and high valuation metrics dampened the performance post listing. Despite this, the IPO story of India races ahead and the IPOs which were launched after Paytm, such as Go Fashion and Tega Industries proved to be extremely successful,” said Mohit Ralhan, Managing Partner & Chief Investment Officer of TIW Private Equity.

The year 2022 is expected to witness IPOs from LIC, Ola, Byju’s and Delhivery. India is home to 79 unicorns; 42 emerged in 2021 alone. “India is the third-largest startup hub in the world and has developed a strong ecosystem of entrepreneurs and venture capital investors, supported by favourable government policies, which will continue to feed into India’s accelerating IPO boom. The story has just begun, and the future looks quite bright,” Ralhan said.

An investment banker said the fate of the IPO market is linked to the strength of the stock market. If the stock market remains volatile and shows major correction, some of the issuers might postpone their IPO plans. On top of this, if issuers price their IPOs at high levels without leaving anything on the table for retail investors, there are bound to be some post-listing disasters.

With the US Federal Reserve planning to hike rates and tighten the monetary policy, foreign portfolio investors (FPIs) have started exiting from newly listed IPOs along with secondary markets.

Market regulator SEBI is also concerned about valuations. The IPO market price discovery is not as “transparent and efficient” as secondary market price discovery, SEBI Chairman Ajay Tyagi said while addressing a CII summit in September last year. In a consultation paper last week, SEBI said new age companies should make disclosures about their valuations based on issuance of new shares and acquisition of shares in the past 18 months before filing draft offer documents.



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