Robust DII Inflows Sustain Indian Equity Market: MOFSL Insight

Mumbai, Dec 4 (NationPress) Despite the ongoing sell-off of equities by foreign institutional investors (FIIs), the inflows from domestic institutional investors (DIIs) are maintaining the market's stability, as reported by Motilal Oswal Financial Services Ltd (MOFSL) on Wednesday.

In October and November, FIIs offloaded equities totaling $13 billion. This correction has led to a cooling off of valuations in large-cap stocks, while mid and small-cap stocks continue to trade at elevated multiples.

In November alone, DIIs saw inflows of $5.3 billion, whereas FIIs experienced a second consecutive month of outflows, amounting to $2.2 billion.

So far in CY24 year-to-date (YTD), FII outflows from Indian equities have reached $2.1 billion, compared to inflows of $21.4 billion in CY23. On the other hand, DII inflows into equities in CY24 YTD remain strong at $58.9 billion, compared to $22.3 billion in CY23.

According to MOFSL, their model portfolio reflects a strong belief in both domestic structural and cyclical themes. They are particularly bullish on sectors such as IT, Healthcare, BFSI, Consumer Discretionary, Industrials, and Real Estate, while showing caution on Metals, Energy, and Automobiles, as mentioned in the Bulls and Bears report.

The Indian stock markets have corrected by 8 percent from their peak during the September-November period, influenced by various factors including earnings moderation and high valuations in midcaps and smallcaps, along with global issues such as a fragile geopolitical situation in the Middle East and a strengthening dollar index after the Trump victory.

In the previous month, the Nifty index saw a slight decline of 0.3 percent (month-on-month), following a 6.2 percent drop in October.

For the second consecutive month, the Nifty-50 closed in the negative. Remarkably, the benchmark index exhibited significant volatility, fluctuating around 1,274 points before concluding 74 points lower.

Over the past five years, midcaps have outperformed largecaps by 127 percent, while smallcaps have exceeded largecaps by 121 percent.

After experiencing a robust 21 percent CAGR from FY20 to FY24, corporate earnings have shown signs of moderation in the first half of FY25, according to the report.