Local funds have sold equities worth ₹1,642 crore in August, the highest in 17 months, data from Sebi shows. This is the third month in a row when domestic fund deployment shrunk. Monthly inflows had peaked at ₹37,799 crore in May.
The positioning of foreign funds is diametrically opposite. FPI (foreign portfolio investors) have deployed more than ₹50,000 crore in August – the highest in 20 months.
The lack of buying support from the local funds has resulted in a drop in buy-to-sales ratio – a measure of underlying strength of investment – to 0.99 in August compared with a long-term average of 1.22. Gross purchase of local funds dropped to ₹80,241 crore in August, the lowest in 14 months. Gross purchase of local funds has been more than ₹1 lakh crore for 10 months in row between September 2021 and June 2021.
Cumulative rolling 12-month investment of local funds stood at ₹2.21 lakh crore at the end of August. The twin benefit of capital appreciation of market and fund flows helped equity portfolio value of local funds rise to a record ₹21.09 lakh crore in July.
Local funds account for 17.4% of the total institutional equity portfolio value of India, data from NSDL show.
The benchmark indices rose 12% in the last two months, taking the total market capitalisation of the country to just a few percentage points from the record high level achieved in January 2022.