Domestic institutions: Keeping the faith

Updated: Saturday, August 31, 2013, 9:56 [IST]

While retail investors have deserted the markets and FIIs are selling aggressively, there's one set of institutions that have kept faith in the markets - domestic institutions. From an intra-day low of around 17,500 points on Wednesday, the Sensex ended the week on Friday at 18,619 points, in a spectacular 1100 points rally.

Through these three days foreign funds were net sellers as the rupee was sinking. Nobody would have anticipated a spectacular rally in stocks. Dealers say that domestic institutions led by LIC have been buying heavily into the market, even as FIIs press sales. This helped prevent a capitulation of stocks during the week.

Take the case of Friday itself. Foreign funds were net sellers in the cash segment of the market to the tune of Rs 75 crores, while domestic institutions net bought to the tune of Rs 731 crores. In fact, foreign funds have been net sellers for the last 12 days on the trot and for almost all of these days domestic institutions have been net buyers. Often they maybe instructed to support the markets and may hence tend to ignore fundamentals.

It's possible that institutions will support the market at every fall and it's possible that this would keep the markets from sliding very sharply.

So, if you are looking at a major downside after the dismal GDP numbers on Monday, chances are there would be one, but, by the end of the week, you would be up, thanks to support from domestic institutions.

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