Indian retail investors seem unperturbed by the ‘FII Winter’

Even as the Indian stock markets are volatile and foreign institutional investors (FII) are selling their holdings the retail investors are continuing their investment.

“Indian retail investors are resilient. They form a significant part of the market,” Radhika Gupta, Managing Director and CEO, Edelweiss Asset Management Company told IANS.

She said even in the past, retail investors did not exit when markets went down and it is time to stop focusing on what FIIs do.

The Association of Mutual Funds of India (AMFI) estimates the total collections by the industry under the systematic investment plan (SIP) in May 2022 was Rs 12,286 crore, up from Rs11,863 crore collected in the month before that.

The total number of SIP accounts at the end of May 2022 was more than 5.48 crore, up from 5.39 crore, but the number of new SIP accounts opened last month was 19.75 lakh, down from 21.82 lakh accounts in April 2022.

The SIP assets under management (AUM) at the end of May 2022 was Rs 565,706 crore down from Rs 578,086 crore at the end of April 2022, said AMFI.

“This is the first time in many years that investors’ optimism is being tested. Also, the number of retail investors have ballooned in recent years. Many of these are Do-It-Yourself (DIY) investors who rely on ‘finfluencers’ for advice and (often gamified) fintech platforms for execution,” Jayant R Pai, Head Products and Chief Marketing Officer, told IANS.

According to him, such investors are likely to be more unsettled, compared to those who rely on Financial Planners for advice.

“Hence, it is possible that some SIPs may be cancelled in case this continues for a few more months. Perhaps a perceptible uptick in the number of SIPs being cancelled may also serve as a contrarian indicator (of the market bottoming out),” Pai said.

As per AMFI figures, the number of SIPs discontinued/tenure completed last month was 10.36 lakh down from 10.53 lakh in April 2022.

Gupta said the market is structurally upward in the long term.

Queried whether retail investors continue to invest is an off beat trend Gupta refuted that and added the numbers are steady and SIPs are expected to grow.

She also added that India is a big country and more people will enter the market and one should focus on the investment goals rather than looking at what FIIs do.

On the factors that make FIIs to sell out Pai said: “High food and fuel inflation leading to fear of a tighter monetary regime (which is coming to pass now). Fear of emerging market currencies being adversely affected as a result of the tightening. War in Ukraine, catalysing attendant geo-political tensions and light-to-safety.”

The interest rates in their home country will also make FIIs exit the market, Gupta said.

On the quantum sold by FIIs and purchases by the domestic institutional investors (DII) Pai said: “January to June 2022 figures depict that FIIs sold (net) Rs 2.62 lakh crore while DIIs purchased (net) Rs 2.07 lakh crore. Hence the ballast provided by the DIIs played a key role in cushioning the trajectory of the decline. However, the desultory investment environment has ensured that they could not alter the direction.”

He said the DIIs will have to hunker down for a while. However, those who are investing with their financial goals in mind and can remain invested for at least five years from today, ought not to feel too perturbed about the ‘FII winter’.

(Venkatachari Jagannathan can be reached at v.jagannathan@ians.in)

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