DIIs invested $90 billion but stock returns flat in past year: KIE

Domestic Institutional Investors(DII), who now comprise more than 19% of the Nifty 500 stocks, invested $90 billion over the past 12 months even in a market that gave almost 0% return, according to a report by Kotak Institutional Equities (KIE).

Barring health care, metal, banks and auto, which have increased less than 5%, all other indices logged negative returns to investors. IT investor returns were reduced the most (20%). Returns of the benchmark Nifty and Sensex, too, dipped in the past year, the authors of the report wrote.

This is despite the huge euphoria among retail investors, as seen from the continued large investment by them via DIIs into the market, several popular narratives emerging periodically, tax and rate cuts and a 5% rupee depreciation, they wrote.

KIE further said that the high DII interest and flat market performance coming together “disprove the market’s belief in ‘flows’ as a driver of markets,” and that “drive investors (institutional and retail) to focus more on earnings and valuations.”  The comment assumes significance as multiple stakeholders in the market, including the mutual fund managers had cited improving flows into the market as one of the evidences that that investors believed in the potential in the Indian market.

Several market analysts have been saying that Indian markets were still expensive for the tepid earnings growth that corporate India had shown. While mirroring the sentiments, KIE also said valuations of some bank and NBFC stocks had become more attractive. Moreover the authors of the report added most large- and mid-cap consumption stocks were trading expensive valuations on a 12-month forward price-earnings ratio basis.