Despite the growing significance of mutual funds (MFs) in domestic equities, foreign institutional investors (FIIs) continue to have more influence in deciding the market direction.
An analysis of rolling three-month investment by FIIs and MFs shows the benchmark Sensex on the BSE dances more to the tunes of the former.
To illustrate with an example, FIIs pumped in Rs 44,220 crore in the three months ending March; the Sensex rallied 11 per cent. In the previous quarter ending December 2016, foreign investors had pulled out Rs 31,222 crore and the Sensex fell four per cent, despite MFs pumping in Rs 32,083 crore. Similarly, in the three months to February 2016, the Indian market dropped 12 per cent despite MFs pumping in Rs 17,818 crore; FIIs had yanked nearly Rs 20,000 crore out during this time.
