Foreign Institutional Investors (FIIs) were big sellers in both Indian equity and debt markets in March 2020, when the COVID 19 pandemic started spreading and the lockdown was announced. Aggregate sales by FIIs were to the tune of about Rs. 125,000 crore. However, recent trends suggest that FIIs have turned significant buyers in Indian equity markets in June 2020. Total net purchases by FIIs in the month stand at Rs. 23,652 crores to date. However, FIIs continue to be net sellers in debt markets. Indian mutual funds were on the hand significant buyers in Indian equity markets in March 2020, and it seems they are now booking profits by resorting to sales when markets have turned bullish.
The data for the last 6 months are given below: (Rs. crore)
|Month||FII Activity||MF Activity|
|June (Till Date )||23,653||-3,148||-1,913||29,976|
FII buying is primarily due to two facts – one, higher liquidity due to a huge fiscal stimulus in their own countries, and second, Indian stocks seem undervalued at current levels given a significant correction. On the other hand, Indian mutual funds seem to be facing selling pressure from retail investors, indicating a possible liquidity crunch at retail / MSME levels.
However, such a situation is conducive to the healthy growth of overall markets. When FIIs were selling, Indian mutual funds were able to provide stability by being net buyers and now when Indian mutual funds are selling, FII purchases are driving the markets up.