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The Indian equity market witnessed a stark contrast in October 2024, with foreign portfolio investors (FPIs) exiting the market in record numbers while domestic retail investors continued their bullish stance, pouring a record amount into equity mutual funds. This divergence highlights the growing confidence of Indian retail investors in the long-term prospects of the Indian stock market, even as global economic uncertainties and concerns about inflation continue to weigh on FPI sentiment.
Data released by the Association of Mutual Funds in India (AMFI) revealed a staggering ₹42,000 crore inflow into equity mutual funds during October 2024, marking a 21.7% increase over the previous month's fresh investment receipts of ₹34,419 crore. This surge in domestic investment stands in stark contrast to the record ₹94,000 crore exodus of FPIs from Indian stock markets during the same period. The net outflow of FPIs from India this year has turned negative, indicating a bearish sentiment towards the Indian market.
The growing preference for disciplined investing among Indian investors is evident in the continued surge in Systematic Investment Plans (SIPs), with the total number of SIP accounts exceeding 10.12 crore. This highlights the increasing popularity of SIPs as a method of investing consistently and building a diversified portfolio over the long term. The record ₹25,323 crore inflow through SIPs during October 2024 further underscores the retail investor's confidence in the Indian market.
Despite the bearish sentiment among FPIs, driven by factors such as global economic uncertainties and relatively attractive valuations in other markets like China, Indian retail investors appear undeterred. The robust inflows into equity mutual funds and the record high SIP numbers suggest that domestic investors are looking beyond short-term market fluctuations and are focusing on the long-term growth potential of the Indian economy. This optimistic sentiment could provide a much-needed buffer against potential headwinds in the coming months.
The contrasting trends in FPI and domestic investor sentiment highlight the growing role of Indian retail investors in shaping the future of the Indian equity market. As domestic participation continues to increase, the Indian stock market is likely to become increasingly resilient to global market volatility. The consistent inflow of retail investment, fueled by a growing awareness of the benefits of equity investing, could drive the Indian market towards new heights in the coming years.
Source: India’s retail equity investment cult rises to a new high amid record FPI outflows