Who is selling when you are trying to stay invested?

You can view the video here

Let’s look at some data first. Foreign Portfolio Investors (FPIs) have withdrawn Rs 24,776.36 crore from equities in March so far. These are the folks who have done the maximum selling in the past few days.

Who are FPIs?

Foreign investors (individuals, companies, governments) create a portfolio consisting of stocks, securities and other financial assets. These investments tend to be more liquid, which makes them much easier to sell (as compared to foreign direct investments). Foreign portfolio investments also tend to have a shorter time frame.

Why are they selling?

The key word is ‘foreign’ as in they have many geographic options to invest in. Right now, it is very difficult to judge which countries will be most impacted by Coronavirus. Also, the rupee has been weakening - in the year 2020 so far, the Indian rupee fell about 3.61 percent against the US dollar. Given these two factors, FPIs have likely moved their funds to safer havens.

Why should you stay invested?

Simply put, because your equity (mutual fund) investment objective is long-term wealth creation and your timeline is five years plus. Obviously different from the FPIs, right? Also, governments across the world are ready and responsive. We are seeing instances of global monetary policies being extremely supportive which will boost corporate efforts as they work harder to overcome effects of the pandemic. Most importantly, because the chart says so 😊 (yes, these are the times we bring out charts and quotes by Warren Buffet).  Despite the many ups and downs caused by various events, the Indian stock market has moved upwards and it will continue to do so.

One more thing – who is buying? 

Domestic Institutional Investors (which are largely mutual fund houses and insurance companies) have been net buyers. This is because their fund managers can purchase stocks at cheaper valuations and therefore provide greater value to their clientele (including you) when the stock market turns upwards.

And now for Warren Buffet’s quote “A prediction about the direction of the stock market tells you nothing about where stocks are headed, but a whole lot about the person doing the predicting.” So forget about all the doomsday predictions and the media tsunami waves. Please focus on staying safe and protect yourself and family from the coronavirus pandemic. After all, You are the biggest asset in your portfolio.

For more videos, check out my YouTube Channel