The FIIs have been persistent sellers of Indian equities. DIIs have bought steadily and supported the market. This explains the index not losing much despite heavy selling by FIIs. The regular domestic inflows are helping DIIs hold the market at higher levels.
In specific areas, like midcaps, we see funds continuously supporting stock prices of companies they are invested in. This is reminiscent of what happened in infra funds through 2008-2010. Domestic Investors kept pouring money into infra funds and were busy averaging down. Fund managers, in turn, supported stock prices. Eventually, the earnings started to wear away causing permanent loss of capital. Investors redeemed with a big loss.
Investing blindly on the basis of past performance is going to cause immense pain for investors. When markets shift towards newer themes and macro trends, investors need to quickly realign. This doesn’t seem to be happening. And, that is the biggest risk to the equity cult in India.
“Risk control is the best route to loss avoidance. Risk avoidance, on the other hand, is likely to lead to return avoidance as well.”– Howard Marks