The Indian stock market has faced a challenging start to October 2024, with Foreign Portfolio Investors (FPIs) exiting the market in significant numbers. Despite these large outflows, Domestic Institutional Investors (DIIs), including major players like mutual funds and LIC, provided stability by purchasing Rs 57,792 crore worth of stocks. This article takes a closer look at how DIIs have played a pivotal role in mitigating the impact of FPI sales on the market.
DIIs Step Up to Support Markets: DIIs have historically acted as a stabilizing force during periods of volatility in the Indian stock market. This month, their timely intervention came as a relief, with key purchases made on October 7 (Rs 13,245 crore) and October 3 (Rs 12,913 crore). Their investment activity has helped counterbalance the outflows from FPIs, who sold Rs 58,394 crore worth of stocks during the same period.
FPI Selling Pressures and Market Impact: FPIs have been net sellers in the Indian market, driven by global economic uncertainties, including geopolitical tensions and rising interest rates in major economies. As a result, the BSE Sensex dropped by 2,885 points, reaching 81,381.36 on October 11. However, the aggressive buying by DIIs helped cushion this fall, preventing a larger market decline.
LIC’s Key Role in DII Strategy: The Life Insurance Corporation (LIC), one of the largest institutional investors in India, has played a crucial role in maintaining market stability. LIC invested Rs 38,000 crore during the June 2024 quarter and continued its support with significant purchases in October. Mutual funds also contributed by utilizing retail inflows to purchase stocks at lower valuations.
How DIIs Stabilize the Market: DIIs focus on long-term investments, which provides a buffer during times of market volatility. Their consistent buying patterns are driven by domestic factors like inflows from retail investors and economic policy stability, making them a vital counterbalance to the more globally influenced FPI flows.
Market Outlook for October 2024: Looking forward, the interplay between DIIs and FPIs will remain a key focus for market participants. Investors will watch closely to see if DIIs can continue to offset the selling pressure from FPIs. The release of economic data and the stance of the Reserve Bank of India (RBI) will also influence market movements.
The Indian stock market in October 2024 has witnessed a crucial balancing act between DII purchases and FPI sales. With DIIs buying Rs 57,792 crore worth of stocks, they have played an essential role in stabilizing the market against Rs 58,394 crore of FPI outflows. This dynamic is set to shape the market’s path for the rest of the month.