Role Play Begins
The last week of a calendar year is usually the time when global institutional investors take a break. When they return in January, their investment actions are often radically different from those made in December. Just like a test batsman takes a fresh guard after a lunch recess, fund managers take a fresh view of things in the New Year.
When nothing changes drastically in the economy over a fortnight, what causes this sharp divergence in investment behaviour? Global fund managers realign their investment allocations across different markets. This often causes drastic shifts in their India strategy and outlay. Indian funds are usually left only with the option of responding to what global funds do.
Recent years saw domestic funds simply play counter strategies to what FIIs did. If they bought, we sold. And vice versa. The behavioural lead was always in the hand of FIIs, while DIIs were more reactive. 2017 changed this dramatically because of domestic investment flows. While FIIs did sell, DIIs took the lead buying and began driving our markets.
2018 will be an interesting year. It remains to be seen if DIIs continue to be the lead drivers or if we will have twin drivers or if FIIs will lead again.
“First-level thinkers look for simple formulas and easy answers. Second-level thinkers know that success in investing is the antithesis of simple.” – Howard Marks