INDIAN RESILIENCE

FOREIGN INVESTORS WERE ALWAYS LOOKED UPON AS THE PRIME DRIVERS OF ANY RALLY IN THE INDIAN STOCK MARKETS. BUT THE CURRENT RESILIENCE IS ONLY ON THE BACK OF DOMESTIC INSTITUTIONAL INVESTORS AND ALSO THE AVERAGE RETAIL INVESTOR. WHAT HAS CHANGED?

- ASHISH RUKHAIYAR

MANY BUSINESSES in India have aligned themselves with the idea of Aatmanirbhar Bharat or self-reliant India. Now, it is the turn of the stock markets. How can they be self-reliant? By not depending on foreign investors to drive a rally or a bull run. And the markets are well on their way. Let us consider some hard numbers. The overall stake of mutual funds (MFs) in the universe of companies listed on the National Stock Exchange (NSE) moved up for the third straight quarter in December 2021 to touch 7.4 percent. If one takes into account only the elite Nifty 50 universe, then the stake inched up to 8.5 percent—the highest level in two decades. Individual retail investors have also upped their overall stake in the Nifty 50 companies to 8.3 percent, and 9.7 percent in the complete NSE universe—the highest in nearly 14 years.

Meanwhile, the stake of foreign portfolio investors (FPIs)-often looked at as the primary driver of bull runs and rallies in Indian stock markets-has consistently fallen over the quarters with the December quarter witnessing a fall of 81 basis points (bps) to 19.7 percent in NSE-listed companies. Among the top 500 listed firms, FPIs' stake fell by 65 bps to 20.9 percent. This was the fourth consecutive quarter that saw a dip in the stake held by foreign investors-now at its lowest level in nine years. In terms of net flows, 2022 has seen FPIs make net sales of nearly $17 billion till May 2. And they have been net sellers since October 2021.

Has this affected India's stock markets? While the benchmark S&P BSE Sensex is down a little over 2 percent in 2022 (till May 2), in March, when FPIs were net sellers of nearly $5.4 billion, the 30-share barometer rose over 4 percent. In 2021, FPIS put in $3.8 billion; the Sensex rose almost 22 percent—its best annual gain since 2017.