Indian investors aren’t just riding the market wave — they are the wave.
Over the last decade, they’ve helped the Indian stock market outperform the S&P 500 and kept it steady even as foreign cash bailed on it.
Relentless domestic mutual fund and ETF investments are pumping billions into the market and have dramatically transformed it over the past decade.
Indians now hold 170 million trading accounts versus 35 million in 2018-19. SIP inflows jumped to 25,000 crores ($3 billion) in November this year, 5x the level seen in 2016, according to the Association of Mutual Funds in India.
It’s no longer a debate. Down days are rarer, corrections are smaller, and the resilience is unmistakable. Take 13 December for instance, when the markets dropped 1.4% before rising 1.4% in mere hours!
A local flavor
Domestic capital is the safety net, Abhinav Sonkar, a quant fund manager at 1POINT6.in and angel investor based out of Bangalore, tells MONIIFY.
In 2022, foreigners pulled out $32.8 billion from the Indian markets but the benchmark Nifty 50 index returned 4.3%. This year, they’ve pulled out around $33 billion, yet the Nifty 50 has risen by around 12%!
Things have changed:
- Since 2020, the Nifty 50 has delivered average annual returns of nearly 15%, compared to 12.4% during 2015-2019.
- Between 2020 and 2024, there were 22 months of negative returns, down from 31 months during 2015-2019.
In the last 10 years, the Nifty 50 has also outperformed the S&P 500, with average returns of 13.7% outpacing the latter’s 11.2%.
It’s all down to the bullishness of domestic investors.
Foreign institutional ownership of Indian stocks stood at about 25% around five or six years ago, and has dropped to 15% now, Deepak Shenoy, founder and CEO of portfolio manager Capitalmind, said in a recent podcast.
Beware though
Top Nifty 50-focused ETFs in India have even given over 100% returns in the past five years. Blackrock’s iShares India 50 ETF has returned 25% in the past year.
Nifty 50 stocks with good financials are worth keeping an eye on. Think Trent, Apollo Hospitals and Bharat Electronics.
But… (there’s always a but.)
Corporate earnings could spoil the party. India’s economic growth is hitting pause, and dud results in the upcoming October-December quarter could shake things up.
A report from Antique Stock Broking warns of a lukewarm quarter ahead for Nifty 50 companies, with financials, telecom, and commodities stocks being the rare exceptions.
Earnings season will kick off in January, so keep an eye out for those all-important numbers before you take the plunge.
