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Institutional fund flows into stocks at a new high in 2019

ET Intelligence Group: Institutional inflows into Indian equities surged to a record high in 2019, an ETIG analysis shows.

Domestic institutional investors (DIIs) and foreign portfolio investors (FPI) together invested Rs 1.43 lakh crore (around $20 billion) in 2019, the highest in any single year over the last fifteen years, according to data compiled by ETIG.

FPIs contributed nearly twothirds of the money, while local funds made up the rest.

The institutional inflow was nearly double the average institutional flow — of Rs 75,706 crore annually — in the past 15 years.

FPIs and DIIs remained net buyers in six of the last 15 years.

Institutional investors have cumulatively invested about $162 billion in the last 15 years.

The ratio of FPI to DII investments has been pegged at 2.55 in the same period.

Institutional investors owned nearly one-third of the total equity of BSE-500 companies as of September 2019.

Institutional flows accounted for about 1 per cent of the total market capitalisation in 2019, in line with the last five-year average when domestic inflows picked up due to the growing size of the SIP book.

The share of DIIs in the BSE 500 reached a record high of 14.4 per cent in the September quarter.

The percentage of trading volume between domestic mutual funds and FPIs has narrowed significantly, as the heft of local money rose.

Trading volume of domestic mutual funds accounted for nearly half the trading volume of FPIs in 2019.

The SIP assets under management (AUM) for local mutual funds stood at Rs 3.12 lakh crore in November 2019 from Rs 2.66 lakh crore in March 2019, according to the Association of the Mutual Funds of India (AMFI).

The growing SIP book shows that the size of sticky long-term money is becoming prominent in Indian equities.

Similarly, the share of longterm foreign funds rose in the FPI AUM in 2019.

The percentage of sticky foreign funds rose to 21.41 per cent in November 2019, a gain of 333 basis points in the last two years.

The rising share of long-term institutional investors could provide more depth to the Indian market and ease redemption pressure in a period of currency volatility or risk-off environment.

Source: Economic Times