Domestic institutional investors (DIIs) made a historic move by injecting a massive Rs 82,668 crore into the domestic stock market in May. This significant inflow came as foreign institutional investors (FIIs) continued their selling streak, offloading Rs 55,963 crore during the same period. The market witnessed a notable shift in liquidity dynamics due to this contrasting behavior between DIIs and FIIs.
The tug-of-war between DIIs and FIIs was evident in the final week’s trading data. Despite FIIs selling a net Rs 23,734 crore over a four-day period, DIIs acted as a stabilizing force by accumulating Rs 25,503 crore. Pabitro Mukherjee, Deputy Vice President-Technical at Bajaj Broking, highlighted the unwavering buying streak maintained by DIIs throughout this period.
Escalating geopolitical tensions in West Asia have been cited as the primary reason behind the substantial withdrawal by FIIs. This, coupled with macroeconomic pressures like a weakening Indian Rupee and higher crude prices, has led to increased global uncertainty and risk aversion. The market has been navigating these challenges while witnessing stable yet eventful trading sessions.
Analysts noted that the optimism surrounding progress towards a potential US–Iran truce and the correction in crude oil prices have improved market sentiment. Despite FIIs adopting a cautious approach and continuing to sell, DIIs have played a crucial role in absorbing foreign selling pressure. Their strong participation has helped prevent sharp declines in benchmark indices, according to Ponmudi R, CEO of Enrich Money.
Looking ahead, experts anticipate that institutional flows in the upcoming month will be influenced by developments related to US–Iran tensions, oil prices, RBI monetary policy decisions, and the progress of the monsoon season.
