Year in Review: Broader markets continue to lag as FPIs stick to large-caps

In Asia, India has highest share of firms that missed earning estimates in June quarter
Polarisation in the markets continued in 2019, with institutional flows sticking to safety of large-caps. As a result, the broader markets continued to lag. The Nifty Midcap closed 5 per cent lower, while the Nifty Smallcap fell about 11 per cent. Domestic institutional investors (DIIs) also shied away from committing large funds, as fund managers avoided mid- and small-cap stocks with no major signs of an earnings recovery. In 2019, DIIs bought Rs 41,443 crore of equities, which was not even half of the Rs 1 trillion put in by foreign portfolio investors (FPIs). Even though the Nifty touched its lifetime high as the year came to a close, sentiments of individual (retail and high-networth) investors were far from restored. Individual investors, looking for exits from underperforming schemes, made use of market highs to pull-out funds. Redemptions jumped 47 per cent to Rs 16,268 crore, over the previous month. Mid-cap schemes – which were a big draw among retail investors – returned a measly 2.4 per cent in 2019, and small-cap delivered negative returns of 2.2 per cent. Amid these uncertainties, equity flows fell 78 per cent month-on-month to a 41-month low of Rs 1,300 crore in November.

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