Institutional flow in Indian equity markets will remain a driving force in the calendar year 2025 as it witnessed robust institutional flows of nearly ₹4 lakh crore in 2024, ICICI Securities expected. The institutional liquidity flow has been a cornerstone for the markets’ outperformance.
It expected the Nifty index, on the higher side, to point towards a potential target of 27,500, setting a bullish tone for the year ahead.
In the year 2024, Foreign Institutional Investors (FIIs) played a major role in shaping market trends. Despite a major sell-off of ₹1.5 lakh crore in the secondary markets in October and November, the Nifty delivered an annual return of 9 per cent. This resilience can be attributed to the inflows into the primary markets through Qualified Institutional Placement (QIPs), Offer for Sale (OFS) and Initial Public Offers (IPOs), which resulted in the marginal net FII inflows of ₹8,000 crore for CY24, the ICICI Impact Report added.
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The report added that a notable shift in FII strategy was observed as funds flowed away from traditional heavyweights such as BFSI (32.5 percent in NSE100) and oil and gas (10 percent by weight), towards capital goods, healthcare and telecom sectors.
On the other hand, sectors like automotive and FMCG witnessed reduced exposure to FII. Sectors such as consumer services, real estate and chemicals attracted more investment, due to a rebalancing of sectoral allocations, the report said.
Financial inclusion and increased participation through Systematic Investment Plans (SIPs) have increased market stability domestically. SIP inflows reached a monthly run rate of ₹25,000 crore, and new inflows of nearly ₹3 lakh crore are expected by 2025. These ‘sticky’ investments have played an important role in maintaining market momentum, the report said. Thematic funds, which focus on non-banking and non-FMCG portfolios, have also helped broaden market flows. This shift has enabled mid- and small-cap stocks to outperform.
This shift has allowed broader markets to outperform, with non-index stocks leading the rally. The NSE500/Nifty ratio has breached a 25-year resistance level, indicating continued outperformance in the coming years.
The Assets Under Management (AUM), in which the mid- and small-cap funds are concentrated, have recorded significant jumps leading to broad-based performance of the market, it added. Like FIIs, even MFs are also putting their large investments in emerging sectors such as telecom, consumer durables and capital goods. The performance of the telecom, consumer discretionary and capital goods sectors was supported by meaningful allocation in these sectors, while the FMCG, oil and gas and financial sectors saw relatively weak allocation, the analysis said.
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