Have the FIIs Lost their Way?

Summary

The video discusses the Indian stock market's impressive 69% rise since mid-June 2022, with Nifty soaring to 25,791. Despite this, foreign institutional investors (FIIs) have been net sellers, losing out on significant gains. Domestic institutional investors, conversely, capitalized on market lows, purchasing heavily when FIIs sold off. The script questions FIIs' market timing, suggesting they've missed out on opportunities in sectors like infrastructure, defense, and energy transition, and ponders if they will now start making aggressive investment mistakes in the ongoing bull market.

Takeaways

• 📈 The Nifty 50 index has seen a significant rise of about 69% from mid-June 2022 to September 2024, reaching 25,791.
• 💹 Domestic institutional investors have been major buyers during market downturns, investing heavily when the market was at its lowest.
• 📉 Foreign institutional investors (FIIs) have been net sellers during the bull market, recording sales of about 1.82 lakh crores.
• 🌐 Global market pressures such as US inflation, China's post-covid recovery, and the Russia-Ukraine conflict have influenced FIIs' investment decisions.
• 🏦 Domestic institutional investors bought shares worth almost 47,000 CR in June 2022, which was the market bottom.
• 📊 FIIs have made poor investment calls at major market turns, selling at lows and missing out on significant gains.
• 💼 Despite their reputation, FIIs have shown a pattern of making mistakes, acting more like retail investors during market fluctuations.
• 🚀 Domestic institutional investors have consistently outperformed FIIs, capitalizing on market opportunities effectively.
• 💸 FIIs have been net sellers for an extended period, even during pre-election months and post-election, showing a lack of confidence in the Indian market.
• 🔄 The trend of FIIs' dominance in the Indian market has shifted, with mixed feelings of fear and respect emerging among investors.

Q & A

What was the performance of the Nifty index from mid-June 2022 to its peak in September 2024?

The Nifty index soared about 69% from mid-June 2022 to hit 25791 in September 2024.

How much money did reckless derivatives traders lose in FY 24 according to the Securities Exchange Board of India?

Reckless derivatives traders lost about 52,000 CR in FY 24.

What was the role of Foreign Institutional Investors (FIIs) during the bull market between June 2022 and September 2024?

FIIs were net sellers during the bull market, recording net sales of about 1.82 lakh crores.

Who were the major buyers when FIIs were selling at the market bottom in June 2022?

Domestic institutional investors were the major buyers, purchasing almost 47,000 CR in June 2022.

What was the behavior of FIIs during the market downturn in January 2023 after the Hindenburg Revelations about Adani stocks?

FIIs sold shares worth over 41,000 CR in January 2023, while domestic institutional investors bought 33,000 CR.

How did FIIs perform collectively at major market turns between June 2022 and September 2024?

FIIs collectively took surprisingly poor calls at almost all major market turns, often selling at the bottom and buying at the top.

What was the investment trend of Domestic Institutional Investors (DIIs) during the same period?

DIIs were big buyers during the period, with net purchases of 70,000 CR when FIIs were selling in mid-2023.

How did FIIs behave in the pre-election months in terms of their investment in the Indian market?

FIIs sold shares worth 1.26 lakh CR in the pre-election months, while DIIs made net purchases of over 2 lakh CR.

What was the mistake of omission made by FIIs during the bull market?

FIIs failed to participate in the big run-up in better quality infrastructure, defense, and energy transition, and public sector companies.

What is the author's speculation about FIIs' future behavior in the market given the US Federal Reserve's rate cuts and Indian government's growth-oriented policies?

The author speculates that FIIs may start making mistakes of commission, charging forcefully into a strong bull market.

What does the author suggest about the image of FIIs as cool and competent professionals?

The author suggests that the image of FIIs as cool and competent professionals is often false, as they can make mistakes, especially during market euphoria.

Outlines

00:00

📈 Market Trends and Investor Behavior

The paragraph discusses the performance of the Nifty index, which has seen a significant rise of about 69% from mid-June 2022 to September 2024. It highlights that while various investor segments have profited from this bull market, reckless derivatives traders have suffered losses. The Securities Exchange Board of India reports that foreign institutional investors (FIIs) have been net sellers during this period, with net sales of approximately 1.82 lakh crores. The narrative points out that domestic institutional investors (DIIs) have been significant buyers, especially during market downturns. The paragraph also touches on how FIIs have historically made mistakes during market fluctuations, often mirroring retail investor behavior. It concludes by noting that despite the recent trend of FIIs being net sellers, the market has continued to rise, suggesting a potential shift in their investment strategies.

05:01

🌐 Global Influences and Market Dynamics

This paragraph delves into the influence of global factors on the Indian market, such as high valuations, US inflation, China's post-covid recovery, and geopolitical tensions like the Russia-Ukraine conflict. It discusses how these factors have affected commodity prices and shipping costs. The script also reflects on the historical dominance of FIIs in the Indian market and how their reputation has evolved over time. The speaker points out that professional investors, including FIIs, are not immune to market pressures and can make mistakes, often by following trends rather than conducting thorough research. The paragraph concludes with speculation on whether the recent changes in US Federal Reserve policies and Indian government initiatives might lead FIIs to alter their investment strategies and potentially make more aggressive moves in the market.

Keywords

💡Nifty

Nifty is a stock market index that represents the weighted average of 50 of the 50-100 top publicly traded companies listed on the National Stock Exchange (NSE) in India. In the video, Nifty is used to track the performance of the Indian stock market, highlighting its significant rise from mid-June 2022 to the time of the report.

💡Derivatives Traders

Derivatives Traders are individuals or entities that trade in financial derivatives, which are contracts whose value is derived from the value of an underlying asset, such as stocks, bonds, or commodities. The script mentions that reckless derivatives traders have lost a significant amount of money, indicating the high-risk nature of such trading.

💡Foreign Institutional Investors (FIIs)

FIIs are institutions like pension funds, mutual funds, and insurance companies that invest in a country's financial markets from outside that country. The video discusses how FIIs were net sellers during a bull market, which is unusual given their reputation for savvy investing.

💡Domestic Institutional Investors (DIIs)

DIIs are institutions based within the country that invest in the local stock market. The script highlights that DIIs were significant buyers during market downturns, which turned out to be profitable as the market rebounded.

💡Bull Market

A bull market is a financial market condition where stock prices are rising or are expected to rise. The video discusses a bull market that has been ongoing for 18 months, during which various investor segments have profited.

💡Panic Sales

Panic sales refer to the selling of assets in a financial market due to fear of further price declines. The video mentions panic sales by FIIs in June 2022, which turned out to be at the market's bottom, illustrating the emotional aspect of investing.

💡Hindenburg Revelations

This refers to the negative report released by Hindenburg Research about the Adani Group, which caused a temporary drop in the market. The video uses this event to illustrate how DIIs took advantage of the situation to buy stocks at lower prices.

💡Momentum Investing

Momentum investing is an investment strategy that involves buying stocks that have had high returns over a certain period and selling those that have had low returns. The video suggests that institutional investors, contrary to their usual behavior, are now engaging in momentum investing.

💡Real Estate and Infrastructure Companies

These are sectors that were heavily invested in by FIIs during certain market cycles. The video points out that FIIs have historically made mistakes by overcommitting to these sectors, which did not yield high returns on capital.

💡Public Sector Companies

Public sector companies are those owned by the government. The script notes that these companies, particularly in sectors like defense and energy transition, have shown improved performance but have been overlooked by FIIs.

💡US Federal Reserve

The US Federal Reserve is the central banking system of the United States, responsible for implementing monetary policy. The video suggests that changes in the Federal Reserve's policies, such as rate cuts, could influence the behavior of FIIs and the direction of the market.

Highlights

The Nifty index has surged about 69% from its bottom in June 2022 to September 2024.

Despite a bull market, Foreign Institutional Investors (FIIs) were net sellers during this period, offloading about ₹1.82 lakh crores.

In June 2022, FIIs sold ₹58,000 crore at the exact market bottom, marking the biggest monthly sale during the downturn.

Domestic Institutional Investors (DIIs) purchased nearly ₹47,000 crore in June 2022, capitalizing on the market bottom.

DIIs consistently bought during FIIs’ selling, with January 2023 seeing DIIs buying ₹33,000 crore while FIIs sold ₹41,000 crore.

The Hindenburg revelations about Adani stocks caused a mini crash, but DIIs turned it into a buying opportunity.

Between January and May 2024, FIIs remained net sellers, barring March when they made a timid net purchase of ₹3,300 crore.

In the pre-election months, FIIs sold ₹1.26 lakh crore, while DIIs bought over ₹2 lakh crore.

Despite the general election results, the market continued to rise, showing that DIIs' bullish strategy paid off.

Over the last 29 months, DIIs were significant buyers while FIIs were net sellers during a strong bull market.

Historically, FIIs were revered for their superior investment decisions, but their dominance is now questioned.

FIIs made mistakes by committing to poorly governed companies in past bull markets, such as in 1994 and 1999.

For the first time, FIIs made mistakes of omission by not participating in profitable sectors like defense, energy transition, and infrastructure.

FIIs have swum against the rising tide for a long period (29 months), missing out on key market gains.

With the U.S. Federal Reserve cutting rates and India's growth-oriented policies, the question arises if FIIs will re-enter the bull market with force.

Transcripts

[Music]

hello and welcome to Money life News and

Views I'm devashish Bas from the market

bottom of

15,183 or so in mid June

2022 The Benchmark index which is Nifty

has soared about 69% to hit

25791 that was last week in the 18

months alone Nifty has surged

52% all investor segments individual

investors mutual funds other domestic

institutional investors seem to have

made good money from this bull market

except of course Reckless derivatives

Traders and this lot has lost about

52,000 CR in FY 24 alone according to a

study by Securities Exchange Board of

inel what about foreign institutional

investors surely with their Superior

knowledge long years of experience and

deep research and large funds at their

disposal they should have reaped the

largest benefits from this full

Market well here are some shocking

overall numbers about the investment

Trends between June 2022 bottom and 20th

September 24 last that's last week fiis

were massive net sellers during a b bu

Market yes you heard that right the

recorded net sales of about 1.82 lakh

crores the biggest monthly sales coming

exactly in June

22 at the exact bottom of a short

depressed period between November 21 and

June

22 even at those low valuation Panic

sales by fiis of over 58,000 CR in that

month remains

unsurpassed they pressed huge sales at

the bottom of the

market Indian and Global markets were

were under pressure at that time that's

from almost late 2021 due to a variety

of factors High valuation sharp rise in

US inflation weak postco recovery in

China and of course Russian invasion of

UK Ukraine which pushed up all commodity

prices and shipping freight costs and so

on now who did the FIS sell to in those

dark days of June

22 well to domestic institutional

investors who were huge buyers of almost

47,000 CR that month at as I said what

turned out to be the market bottom

surprisingly this trend was repeated

with boring regularity thereafter take

take for instance January 23 when

Hindenburg Revelations about adani stock

adani stocks shook the market the mini

crash was an opportunity for for the

domestic institution investors to buy

and they borrow 33,000 CR that month

while panicky fi sold shares worth over

41,000 CR of course even sa investors

sometimes get it wrong but FIS

collectively took surprisingly poor

calls at almost all M Major Market turns

now here I must say that all my numbers

are fundamentally based on the The Daily

cash sales that's that are reported some

of these numbers are subsequently

changed or SEI has different set of

numbers from what is initially reported

and so my figures may be slightly

different from what you read elsewhere

now to go back to what I was saying

while FIS did invest strongly between

May and July 23 the earliest stage the

earliest stage of of the current ongoing

bull market they quickly turned beish

over the next 3 months pressing net

sales of 76,000 CR which were as I said

with boring regularity lapt up by diis

that is domestic in institutional

investors their net purchases those

three months when fi were selling in mid

23 was 70,000 CR and so when the market

took off in mid November it was the diis

who gained handsomely with fiis looking

rather

foolish undeterred by this experience fi

remain net sellers every month between

January and May 24 baring March when

they had net and that to a very timid

net purchase of just about 3,300

CR what happened in the pre-election

months well they sold shares worth 1.26

lakh CR while diis met nit purchases of

over 2 lakh CR their fires were over

cautious the diis were probably Reckless

and we're buying we don't know well that

call went wrong again for f

the market fell on the day of the

general election results and continued

to March higher surprisingly even in the

first four months after the election fi

only made a small amount of net

purchases and pressed over 20,000 CR of

sales in August however they have been

net buy so far in September now all

these figures may be influenced in a

small Way by large bulk deals where one

side of the transaction is not in I or

di the trend is very clear over the last

29 months of a strong bull market

domestic institutions investors were big

buyers and foreign institutional

investors were poor were probably net

sellers we don't know the what the

actual final figures are but they are

probably net

sellers how times change at one time the

dominance of fiis in the Indian market

was so complete that the late R Revy

moan who was then manag maning director

of chrysle had said the reverance for

fiis had now metamorphosed into mixed

feelings of fear and all what is

surprising though is not that the FI has

got it wrong professional investors do

get it wrong often their image of being

cool competent professionals who remain

calm during Market Euphoria and wait to

BU a fair value after deep research and

exhaused exhaustive diligence is often

false but the mistakes are almost most

always acts of commission not usually

acts of omission how does that work in a

strong bll Market the chased the flavor

of the day and act like retail investors

in 1994 they had loaded up on global

issues of asset heavy poorly governed

Indian companies in the bull market of

1999 they're frantically charged into

Shady software companies either based on

imitation or rumors or joint positions

with speculators and other fund or in

expectation of a price run up before

overseas Equity offerings the flight to

irrationality exactly what we saw in

9395 LED them to create exposure of

almost 60 to 80% in technology media and

telecom companies at of huge

valuations what happened next in the

crazy bull market of 20058 they were

overc committed to another set of hot

flavor of the month ideas which is real

estate and infrastructure companies

earning very poor Returns on on Capital

but now for the first time fiis have

made mistakes of omission not commission

they failed to participate in the big

runup in better quality infrastructure

companies defense and energy transition

and public sector companies many of

which have reported vastly improved

performances I have no idea why this is

happened after all professional

investing is a competitive business and

performance is benchmarked every month

mon consequently even institutional

investors cannot remain immune to buying

what is working or what is popularly

known as momentum Investing For The

First Time in 30 years I notice fii is

choosing to swim against a rising tide

and that for a very long period 29

months

now the question is now that the US

Federal Reserve has started cutting

rates and Indian government's growth

oriented policies seem to be continuing

will they find has now start started

start making mistakes of commission that

is charge forcefully into a strong bull

market we'll wait and see what happens

thanks for watching and if you did like

it please share and do subscribe thank

you

[Music]