By The Indian stock market is navigating a turbulent October 2024, marked by a striking contrast between the significant sell-offs by Foreign Portfolio Investors (FPIs) and the robust purchases made by Domestic Institutional Investors (DIIs). With FPIs withdrawing Rs 58,394 crore, DIIs have stepped in with a substantial investment of Rs 57,792 crore, highlighting their crucial role in maintaining market stability.
Market Overview: October’s Shifting Tides: At the beginning of October, the BSE Sensex was riding high, reaching a peak of 84,266.29 points. However, external economic pressures—including rising interest rates and inflation—prompted FPIs to initiate a mass sell-off. By October 11, the Sensex had fallen by 2,885 points, settling at 81,381.36. This decline raised alarm bells among investors, many of whom were concerned about the sustainability of the market.
Despite the FPI exodus, the buying spree by DIIs has provided a counterbalance to the volatility, instilling confidence in retail investors and showcasing the resilience of the Indian stock market.
The Impact of LIC and Mutual Funds on DII Purchases: LIC has emerged as a leading player in the DII landscape, with substantial investments over the past year. Having invested Rs 132,000 crore in equities in the previous financial year and Rs 38,000 crore in the June quarter, LIC’s financial strength has enabled it to play a stabilizing role in the current market.
Mutual funds, too, have been actively participating in DII purchases. The influx of retail investor capital has empowered mutual funds to execute significant transactions, particularly on key days such as October 3 and October 7, when they collectively invested Rs 12,913 crore and Rs 13,245 crore, respectively.
What Lies Ahead: Market Predictions and Investor Sentiment As October unfolds, the pivotal question remains: will DIIs continue their aggressive buying strategy? Analysts indicate that as long as global economic conditions remain uncertain, FPIs may exercise caution, potentially allowing DIIs to further strengthen their positions.
Moreover, the contrasting strategies of DIIs and FPIs underscore the importance of domestic capital in the Indian stock market. While FPIs are often influenced by global trends, DIIs tend to focus on local economic fundamentals, contributing to a more stable investment environment.
The events of October 2024 have highlighted the essential role of Domestic Institutional Investors in countering Foreign Portfolio Investor sell-offs. By investing Rs 57,792 crore against FPIs’ Rs 58,394 crore in withdrawals, DIIs have showcased their resilience and commitment to the Indian market. As the month progresses, their actions will be crucial in shaping the future trajectory of the stock market.
