Domestic institutional investors (DII) continue to slow their equity market investments. They sold about Rs 6,300 crore worth of shares in November 2022, as India’s benchmark S&P BSE Sensex and Nifty50 hit new highs this week, data showed.

Since the beginning of 2022, DII has been procuring an average of more than Rs 35,000 crore per month. From June 2022, the pace will slow down. Provisional data from the NSE shows that they have been buying stocks worth about Rs 5,000 crore a month on average since June.

Some analysts attribute the November sell-off to stretched valuations. Others attributed it to profit-taking selling pressure.

However, analysts expect DII investment to recover in the coming months following a healthy Systematic Investment Program (SIP) and an expected pause in rate hikes by the Reserve Bank of India (RBI).

Equity mutual funds recorded healthy inflows of Rs 9,390 crore in October, while SIPs hit a record high of over Rs 13,000 crore.

DII remains cautious about the domestic and global economic outlook. Earnings slowed in the September quarter as higher input costs slowed manufacturing. The deteriorating economic situation in Europe and China’s strict zero-covid policy also worried investors.

Analysts are hopeful they will jump into the stock once those issues ease. “With massive retail inflows from mutual funds and loosening rules for domestic institutions investing in the stock market, we see no reason for DII not to participate in the market,” the analyst added.

Although the local equities hit a record high, analysts believe the positive trend will continue in the short term with limited downside. Still, analysts suggest that investors should be selective regarding sector rotation and a bottom-up approach, which may be the best.