Shopping spree: Domestic investors step up as foreign counterparts exit

Amid a massive selloff by foreign portfolio investors (FPIs), domestic institutional investors (DIIs) — comprising mutual funds (MFs) and insurance companies —have stepped up their purchases this month.

This buying spree is not an isolated incident. Historically, DIIs, particularly MFs, have seized opportunities to buy during sharp selloffs by overseas funds. The sustained inflows through systematic investment plans (SIPs) and the Employees’ Provident Fund Organisation (EPFO) provide MFs with the necessary firepower to invest during market downturns. This domestic support has helped cushion the Indian market’s downside and kept volatility in check. Between October 2021 and June 2022, FPIs withdrew a staggering Rs 2.56 trillion ($30 billion) from domestic equities, leading to an 18 per cent market decline. However, strong DII buying helped the market recoup all the losses in a matter of months.