Consider
this-- an investor who had invested Rs. 10,000 in Nippon India Growth Fund
(erstwhile Reliance Growth Fund) during its NFO (08/10/1995) has grown to Rs.
15,57,118 (as on 28/02/2021) logging an
eye popping CAGR of 21.98%.
We Indian retail investors -- always suffered from FII phobia (fear of “heavy selling' by FIIs) one day” before exiting India lock, stock and barrel.
The FIIs seems to have played on to this fear of retail investors and have come to hold nearly 25% of the floating stock of Sensex—confident of the companies’ performance over long term and its impact on the stock prices.
Every
new high made by the stock prices or indices are looked upon as “peak” by
retail investors worthy of converting their equity holdings into say gold or fixed deposit.
A majority of equity investors have gradually evolved as investment traders over the years rather than long term investors in true sense of the word.
The
answer is probably yes.
When the pandemic first struck India in March 2020, FIIs sold (net) Rs. 5,200 worth of equities, while Domestic Institutional Investors (MF, Insurance companies etc.) sold Rs. 825 crores (net) of equities to meet redemption pressure. Thereafter, FIIs went on a buying spree (because of attractive valuations) and bought (net) equities worth Rs. 36,910 crores over the next 4 months. Domestic Institutional Investors sold equities worth Rs. 7,263 during the said period. The Nifty went up from 9,553 (closing level of April 2020) to 11,387(closing of August 2020)
The buying spree started again from October 2020 (net buy Rs. 14,537 crores) when Nifty closed at 11642 and till March 2021, FIIs bought stocks worth Rs. 1,75,381 crores. Nifty closed at 14690. While DIIs sold (net) stocks worth Rs. 1,26,000 crores.
Consider the following table:-
|
|
FII |
DII |
Nifty |
Sensex |
|
April
2020 |
-5209 |
-825 |
9553 |
32720 |
|
May
2020 |
13178 |
11356 |
9580 |
32420 |
|
June
2020 |
5493 |
2434 |
10302 |
34915 |
|
July
2020 |
2490 |
-10007 |
11073 |
37606 |
|
August
2020 |
15749 |
-11046 |
11387 |
38628 |
|
Sept
2020 |
-11410 |
110 |
11247 |
38067 |
|
October
2020 |
14537 |
-17318 |
11642 |
39614 |
|
November
2020 |
66307 |
-48339 |
12968 |
44150 |
|
December
2020 |
49992 |
-37293 |
13981 |
47751 |
|
January
2021 |
14775 |
-11970 |
13634 |
46285 |
|
February
2021 |
18023 |
-16358 |
14529 |
49099 |
|
March
2021 |
11747 |
5204 |
14507 |
49008 |
One
thing that is evident from the table above is that Indians investors do not
have the confidence in their own equity markets and therefore are not willing
to hold on to their equity investments for long term and reap the benefit of
not only compounding but also the positive effects of growth in our Indian
economy.
We, Indian investors—are more willing to convert an asset returning 12-15% CAGR to an asset returning 8-9% and without any intermittent payouts.
It
is because of our unfounded fear of FIIs exiting en masse’ that they have
been able to gain control of roughly 25% of the free float of BSE.
The above numbers reinforces our belief that FIIs have more confidence in the potential of our equity markets than we have in our own market. It will be prudent to follow FIIs while investing—buy right, sit tight.
