Distinct paths | Mint

The distinct path that retail investors are charting for themselves from foreign investors is remarkable. According to stock exchange data, small investors—those investing up to Rs2 lakh of a company’s equity capital—turned net sellers in the three months ended 30 June, cutting their stakes in 253 of 439 Nifty 500 companies. The selling came despite the market rallying 14% from a March low. Foreign portfolio investors, on the other hand, made net purchases of Rs1.03 trillion during the quarter, helping the market break out of a nearly 20-month range. This divergence contrasts with earlier phases when domestic buying was driving Indian stocks even as foreign investors cashed out. While the latter seems attracted by India’s economic fundamentals and prospects, domestic investors might be in a mood to book profits, even as weaker corporate earnings in some sectors may have acted as a dampener of stock buying. Broadly, the trend shows our bourses have a reasonable balance of foreign and local participants. And so long as there’s buying interest, Indian markets will hold up under selling pressure. Of course, earnings must rise to justify valuations too.