Mutual Funds, Insurers Cushion Market From Urjit Patel’s Shock Exit, BJP Loss
FIIs sold Rs 2,421 crore worth of stocks today, the most since Oct. 11.
Buying by mutual funds and insurance companies in key index heavyweights helped Indian benchmarks recover from the initial slide triggered by surprise resignation of Urjit Patel and trends showing that the ruling Bharatiya Janata Party has lost power in at least two key states.
That even offset selling by overseas investors. Foreign institutional investors net sold Rs 2,421 crore worth of stocks today, the highest since Oct. 11, according to data on the website of National Securities Depository Ltd. Domestic institutional investors pumped in Rs 2,256 crore, the most since Oct. 29.
So far this month, overseas investors have bought Rs 6,184 crore worth of shares, while domestic counterparts sold Rs 156.76 crore.
Patel’s exit on Dec. 10—about nine months before his term ended and after a standoff with the government over central bank’s independence—was expected to weigh on Indian equities along with election results. While the markets tumbled immediately after opening, benchmark indices recovered to end higher by close. The Sensex swung 781 points.
The rebound was primarily led by domestic institutional investors like mutual funds and insurance companies, driven by buying in heavyweights like Reliance Industries Ltd, ITC Ltd., Tata Consultancy Services Ltd., State Bank of India Ltd., Infosys Ltd., Kotak Mahindra Bank Ltd. and Axis Bank Ltd., according to NSE data.
Most of these companies, which together have a weight of 33 percent in Nifty 50, had a higher delivery or settlement percentage than the average of NSE 24.2 percent. That indicates buying by institutions as they are not allowed to speculate.
At least three brokers told BloombergQuint on condition of anonymity that the Life Insurance Corporation was a net buyer in total trade.
Mutual funds were also active in the market as equity schemes continue to witness net inflows through systematic investment plans, said a trader at an institutional brokerage. The equity schemes of mutual funds are sitting on cash and have been buyers in the market, the trader said.
Mutual funds saw net inflows of Rs 7,579 crore into equity schemes in November and Rs 75,446 crore since April.