Domestic Funds See Outflows After 5 Years

Domestic institutional investors (DIIs) recorded their first outflows in 2020 after five years of inflows. This is at odds with bulge bracket FIIs powering the indices to fresh highs virtually daily, as on Monday the BSE Sensex powered to a new peak crossing 49,000.

According to a report by Motilal Oswal Institutional Equities, in the calendar year 2020, while FIIs inflows were at a record high, outflows by DIIs were at fresh highs too. FII inflows for CY20 were strong at $23.4 billion – the highest since CY12. However, DIIs recorded their first outflows (-$4.9 billion) after five years of inflows.

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In CY20, mid-caps were up 22 percent. Over the last five years, the mid-cap index has underperformed the Nifty by 20 percent. All sectors, except PSU Banks (-20 percent) and Oil (-4), closed in the green. Healthcare (+61), Technology (+57), and Cement (+27) were the top performers.

Divis' Labs (+108 percent), Dr. Reddy's Labs (+81), Infosys (+72), Cipla (+71), and HCL Tech (+66) were the best performers in the Nifty. IndusInd Bank (-41), Coal India (-36), IOCL (-28), ONGC (-28), and BPCL (-22) were the key laggards.

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Despite the COVID-related challenges, the Nifty has ended CY20 with a 15 percent return. An 80 percent reduction in active COVID-19 cases since September 2020, strong corporate earnings in September, which resulted in upgrades, and faster than anticipated economic and demand recovery, along with supportive liquidity and interest rate backdrop, have provided the necessary triggers.

"As vaccination in India commences from January 16, 2021, we expect the demand recovery to gather pace. We also expect the government to prioritize growth in its forthcoming Budget. After the sharp rally in the preceding three months, it is now important for corporate earnings to match expectations," the report said. Over CY10-20, Nifty's market capitalization has increased by 2.8x to Rs 109.3 trillion. The same was up 44 percent since December 2017. (IANS)