While foreign institutional investors (FIIs) may be buoyed by Timothy Geithner’s $1 trillion rescue plans, domestic institutional investors (DIIs) are using this recent rise in stocks to sell some of their holdings.
According to the Bombay Stock Exchange’s (BSE’s) provisional data, DIIs, which include mutual funds, banks and insurance companies, have been net sellers of Rs 275.83 crore in the last six trading sessions. While FIIs have bought as much as Rs 2,678.24 crore during the same time, they have sold only Rs 452 crore.
Since March 23, DIIs have bought only Rs 471.39 crore on a net basis. The BSE Sensex moved up almost 6.7 per cent in just six days. Experts say a lot of investment managers might be looking at this as an opportunity to book profits.
“Some people are booking profits because probably, they want to stay in cash. Others might not be sure about the sustainability of this rally, so they are cashing out”, said a fund manager.
Last week, Sensex touched the psychological 10,000 mark after a hiatus of two-and-half months.
Vikram Kotak, Chief Investment Officer, Birla SunLife Insurance, said, “Most India-dedicated FIIs are sitting on large amounts of cash and domestic institutions are also more or less in a similar position. Strong insurance flows in March may lead to further buying in equities, going forward.”
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Besides, there are no redemption pressures from investors, said distributors. “Though there were apprehensions from some fund houses that there may be some redemptions when the market goes up, we have not seen it so far,” said a distributor of a renowned broking firm.
As insurance companies do not generally buy or sell on a day-to day basis, experts said it would be mutual funds who are selling. Mutual funds have been maintaining high cash levels of 15-18 per cent but with the air of optimism, they might look at deploying this preserved cash.
Anil Chopra, CEO, Bajaj Capital, said, “Mutual fund investors are not redeeming because people who had invested a year or two ago are still in losses. So, it does not make sense. On the other hand, some investors are bringing fresh money but on a cautious note.”