Foreign Investors No More in the Driver's Seat - Chart Of The Day 20 August 2018 - Equitymaster
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Foreign Investors No More in the Driver's Seat
Aug 20, 2018


I remember a time when market participants would look for cues about the direction of the market by closely following the buying and selling activity of foreign investors. Because at that time, foreign investors played a dominant role in the Indian markets.

But guess what, this has changed. The foreign investors are no more in the driver's seat in the Indian stock markets.

Look at today's chart...

The blue line plots the annual net equity investment by foreign investors, while the red line represents the net equity investments by mutual funds.

Between FY01 and FY15, the blue line (foreign investors) is consistently above the red line (mutual funds), except in the financial year 2008-09 (FY09). That was the only year in the 15-year period when mutual funds were net buyers in the face of an exodus by foreign investors in the aftermath of the global financial crisis.

But the dominance of foreign investors has been challenged since FY16. The net investments by mutual funds have exceeded foreign investor inflows in two of the last three financial years.

This is the reason why markets have remains relatively buoyant despite the heavy selling by foreign investors in recent months. Had it not been for the steady domestic investor inflows, the markets would have been in a deep correction.

Data Source: CMIE

This Chart Of The Day was published in The 5 Minute WrapUp - This is How You Can Beat Everyone in the Market

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