Real estate stocks bounced back Wednesday after a rocky stretch triggered by the coronavirus outbreak. The stock market as a whole rebounded Wednesday as

Is it the end of a bull phase in the Indian stock market considering that the FII are exiting?

Till 2017, from a very long time, the investments into stock markets was more dependent on the FII flows to a great extent. But since demonetization, interest rates crashing and no other avenues like real estate or gold to invest, the retail investors have been investing quite a lot into the Indian market, albeit through mutual funds in the form of SIP’s. The monthly flows in SIP have been accounting for almost Rs. 5000 cr – 6000 cr each month and in Aug, the flows hit Rs. 20,000 cr. That is a lot of money waiting to be invested.

If you look at the FII flows for the month of Sep 2017, they have been Net Sellers to the tune of Rs. 5900 cr which is not a small amount. But they have been Net Buyers in the debt market with flows at Rs. 4200 cr.

If you look at the last 12 months as a whole, FII’s have been Net Buyers to the tune of Rs. 22,400 cr and around Rs. 89,000 cr in debt. So there is clear indication that FII’s have been moving out of Equity and investing in Debt.

Even with these low FII flows, the market has been rallying all throughout 2017 only because the mutual funds have been Net Buyers. The MF’s have invested close to Rs. 105,000 cr in equity and Rs. 382,000 cr in debt (including liquid funds).

Even if you take for the month of Sep 2017, MF’s have invested almost Rs. 6500 cr in Equity and Rs. 25,000 cr in debt.

So, after rallying for almost a year, the stock market obviously needed some correction. During a program called “Cafe Mutual” on CNBC TV18 on Friday, Mutual fund managers of ICICI, HDFC, IDFC etc have said that they would not like to buy in this dip but wait for the market to correct by another 5 – 10%.

So, all in all, it seems that the flows are going to reduce into equity, till the market corrects and makes a bottom around the 9700 – 9800 on the Nifty. This seems to be a reasonable correction in an other wise continuing BULL RUN.

As far as retail investors into direct equity are concerned, they can start looking at their portfolio and whichever stocks they would like to sell, should be sold off, cleaning up the bad stocks in the portfolio. At the same time. whichever stocks they want to hold, they can start investing in small amounts, like 10% for every 100 points of Nifty up or down.

This seems to the rationale call at this time, suggested even by market participants, analysts, fund managers and other brokerages.

Data credits: moneycontrol.