The institutional flow in the 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, the ICICI Securities anticipated. The institutional liquidity flow has been a cornerstone for the markets’ outperformance.
It anticipated that the Nifty index, on the higher side, is pointing 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 significant role in shaping market trends. Despite a major sell-off which amounts to ₹1.5 lakh crore in the secondary markets during October and November, the Nifty delivered a 9 per cent annual return. This resilience can be attributed to inflows in primary markets via Qualified institutional placement (QIPs), Offer for Sale (OFS), and Initial public offerings (IPOs) which resulted in the marginal net FII inflows of ₹8,000 crore for the CY24, the ICICI Securities 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 like BFSI (32.5 per cent weight in NSE100) and Oil and Gas (10 per cent weight), towards Capital Goods, Healthcare, and Telecom sectors.
On the other hand, sectors such as Auto and FMCG witnessed reduced FII exposure. Sectors such as Consumers Services, Realty, and Chemicals attracted increased investments, reflecting a rebalancing of sectoral allocations, the report added.
Financial inclusion and increased participation through systematic investment plans (SIPs) have boosted the market stability on the domestic front. The SIP inflows reached a monthly run rate of ₹25,000 crore, fresh inflows of nearly ₹3 lakh crore are projected for 2025. These “sticky” investments have been instrumental in sustaining market momentum, the report added. Thematic funds, those focused on non-banking and non-FMCG portfolios, have also contributed to the broadening of market flows. This shift has allowed 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 broken a 25-year resistance level, signalling continued outperformance in the coming years.
The Assets Under Management (AUM) concentrating the mid and small-cap funds have seen significant jumps leading to broad-based performance of the market, it added. Just like FIIs, even MFs are also deploying their major allocation in emerging sectors such as Telecom, Consumer Durables, and Capital Goods. The performance of Telecom, Consumer Durables and Capital Goods space was backed by meaningful allocation in these sectors while FMCG, Oil and Gas and Financial sectors saw relatively low allocation, added the analysis.
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