Strong DII inflows keep Indian equities afloat: MOFSL

Despite the foreign institutional investors (FIIs) continue to sell equities, domestic institutional investors (DIIs) inflows are keeping the market afloat, Motilal Oswal Financial Services Ltd (MOFSL) said in a note on Wednesday.

FIIs sold equities worth $13 billion in October and November. The correction has cooled off the valuations in large-caps, even as mid/ smallcaps trade at expensive multiples.

In November, DIIs recorded inflows of $5.3 billion. In contrast, FIIs recorded the second consecutive month of outflows at $2.2 billion.

FII outflows into Indian equities stand at $2.1 billion in CY24 year-to-date (YTD) compared to inflows of $21.4 billion in CY23. DII inflows into equities in CY24 YTD continue to be strong at $58.9 billion against $22.3 billion in CY23.

“MOFSL believe its model portfolio reflects conviction in domestic structural as well as cyclical themes. It is overweight on IT, Healthcare, BFSI, Consumer Discretionary, Industrials, and Real Estate, while it is underweight on Metals, Energy, and Automobiles,” the Bulls and Bear report mentioned.

Indian stock markets have corrected 8 per cent from the top over September-November, due to a variety of factors like earnings moderation and elevated valuations in midcaps and smallcaps, along with global factors, such as a fragile geopolitical backdrop in the Middle East and a strengthening dollar index following the Trump victory.

The Nifty further corrects marginally by 0.3 per cent (on-month) last month after a 6.2 per cent decline in October.

The Nifty-50 closed in the red for the second consecutive month. Notably, the benchmark index was extremely volatile and hovered around 1,274 points before closing 74 points lower.

During the last five years, midcaps have outperformed largecaps by 127 per cent, while smallcaps have outperformed largecaps by 121 per cent.

After recording a healthy 21 per cent CAGR over FY20-24, corporate earnings have moderated in H1 FY25, the report noted.