Vivek Kaul writes….As the stock prices have soared over the last few years, the FIIs have not bought much. A bulk of their buying in Indian stocks happened before and in 2014-2015. Between 2009-2010 and August 2018, the FIIs invested Rs 6,45,917 crore in Indian stocks. Of this, Rs 5,95,155 crore, came in before March 2015.
At the end of March 2014, the BSE Sensex was a little over 22,300 points. As of end August 2018, it was a little over 38,600 points. Basically, FIIs have gained quite a lot from the dramatic rise of Indian stocks, by investing early and holding on to their investment.
A bulk of their buying in Indian stocks happened when the price to earnings ratio of the BSE Sensex was lower than 19, a clear indication of the age-old stock market wisdom of buying low.
In comparison, the DIIs sold stocks worth Rs 1,03,603 crore between 2009-2010 and 2014-2015. This is when stocks were available at a good price. Between 2015-2016 and August 2018, they bought stocks worth Rs 2,67,752 crore. Hence, a bulk of the investment by DIIs in stocks has happened after the stock market has rallied quite a bit. Most of the buying by DIIs has happened at a time when the price to earnings ratio of the BSE Sensex was greater than 22.
In fact, DIIs invested Rs 1,14,600 crore in 2017-2018, the highest amount of money they have ever invested in the stock market, during a single year. At the beginning of April 2017, the BSE Sensex was already close to 30,000 levels. This is a clear case of buying high, something which goes against the most basic stock market wisdom.
Vivek concludes
All in all, foreigners have gained more out of the Indian stock market than the Indians, in the last decade. And that’s not good news.
Once the current stock market bubble deflates, a new generation of Indian investors will come to the conclusion that investing in the stock market is a gamble, which it clearly is not if one invests in an informed way and not just follow the herd.