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The Indian equity markets have managed to survive the macroeconomic risks, geopolitical tensions, and foreign selling, thanks to domestic institutional investors (DIIs) who have net bought a record Rs 2.53 lakh crore worth of shares in FY23. This is higher than the Rs 2.21 lakh crore invested by DIIs in FY22.
On the other hand, foreign institutional investors (FIIs) were net sellers of Indian equities for the second consecutive year. They net sold shares worth Rs 40,413 crore this fiscal year, but this amount is much less than the Rs 1.4 lakh crore worth of selling done by them in FY22.
The strong buying by DIIs and lower selling by FIIs have helped mitigate the losses in Nifty 50, with the benchmark index losing only 0.4% in FY23.
The troubles for Indian markets started at the beginning of 2022 when commodity prices surged after Russia‘s invasion of Ukraine in February, which pushed inflation to a multi-decade high in global economies like the US and Europe.
The US Federal Reserve raised interest rates by 450 basis points, while the Reserve Bank of India increased rates by a cumulative 250 bps in the current financial year.
The biggest selling by FIIs in FY23 was in June when they sold equities worth more than Rs 50,000 crore. In this month, the Nifty50 lost nearly 5%. However, FIIs made a comeback in July and August, when they cumulatively pumped in Rs 56,000 crore.
Market experts believe that the first half of FY24 is likely to remain volatile due to uncertainties on the global front and risks related to inflation. Nevertheless, they do see FIIs making a big comeback to India in FY24, as the domestic growth story remains promising when compared to other emerging markets.