DIIs to invest $20.2 billion in 2023
New Delhi: While DII inflows have been strong over the past few years, rising global interest rates have kept FPI inflows in check, according to Quantum Mutual Fund.
DIIs have invested $35.8 billion in 2022 and $20.2 billion in 2023. FPI inflows this year have been low at $12.8 billion, but better than outflows of $16.5 billion in 2022. This has resulted in a decade of decline in FPI ownership.
With global inflation and interest rates softening, India’s stable policy environment and resilient economy could attract meaningful foreign inflows. The year 2023 defied the consensus view of moderate equity returns given the backdrop of rising global interest rates, limited scope for valuation expansion and higher crude oil prices amid geopolitical tensions, the report said.
The Sensex gave a total return of 19.1 percent, which was mainly contributed by earnings growth. BSE Mid Cap and BSE Small Cap indices gave returns of 44.7 per cent and 46.7 per cent respectively.
Returns in the large and mid-cap indices were mainly driven by earnings growth with flat earnings multiples. This is a sign of the strengthening of the earnings cycle that began in FY2012.
Small and midcap stocks have recorded relatively better returns compared to their earnings growth. Apart from normalization in earnings, higher flows into these categories have contributed to better returns in the segment. The cumulative share of inflows into small and mid-cap categories over the last three years is 28.3 per cent, while the AUM share is 19 per cent.
Due to relatively low historical returns compared to earnings growth, large caps appear favorable on a risk-reward basis.
