NSE cos: FII holding at 11-year low, domestic MFs stake at all-time high

Ownership of Government as a promoter increased to a 7-year high of 10.38 per cent in three months ended March this year fuelled by the strong performance of several PSUs

The share of domestic Mutual Funds (MFs) in companies listed on the National Stock Exchange (NSE) has reached a new high of 8.92 per cent as of March 31, 2024. This is an increase from 8.81 per cent at the end of December 2023, according to data analysed by primeinfobase.

This surge is attributed to strong net inflows of Rs 81,539 crore (around $10 billion) during the first quarter of 2024. Net inflows represent the difference between new money invested in MFs and redemptions (money withdrawn).

LIC (Life Insurance Corporation) increases holdings:

LIC, India's biggest institutional investor, also increased its holdings in companies. As of March 31, 2024, LIC held more than 1% stake in 280 companies, representing 3.75% of their total shares. This is up from 3.64% at the end of December 2023.

Since LIC controls a major portion (at least 70%) of equity investments by insurance companies (around Rs 14.29 lakh crore or $1.7 trillion), this increase in LIC's holdings has a ripple effect. As a result, the overall share of insurance companies in the stock market also went up slightly, from 5.37% to 5.40% during the quarter.

Domestic investors are steadily gaining ground. 

According to the report by PRIME Database Group, the share of Domestic Institutional Investors (DIIs) surged to a record high of 16.05% as of March 31, 2024, driven by net inflows of Rs 1.08 lakh crore (around $13 billion) during the quarter.

This rise in DII holdings comes at the expense of Foreign Institutional Investors (FIIs).  FII share in the Indian market has declined to an 11-year low of 17.68%, marking a significant drop of 51 basis points from the previous quarter.  This narrowing gap between DII and FII ownership is the tightest ever recorded, with DII holdings now just 9.23% lower than FII holdings.

Shifting Tides: From FII dependence to DII dominance

Analysts see this trend as a move towards "atmanirbharta" (self-reliance) in the Indian stock market.  Historically, FIIs have been the dominant non-promoter investor group, heavily influencing market direction.  Sharp market corrections often coincided with FII pullouts.  However, the data suggests this dynamic is changing.  DIIs, along with retail investors, are now playing a crucial role in counterbalancing FII activity.

Investment preferences 

The report also highlights contrasting investment preferences between DIIs and FIIs.  DIIs increased their allocation most significantly in the Energy sector (from 6.70% to 7.77% of their total holdings), while decreasing their focus on Information Technology (from 9.25% to 8.41%).  Conversely, FIIs increased their exposure to Consumer Discretionary stocks (from 15.03% to 16.27%), while reducing investments in Financial Services (from 30.90% to 28.39%).

The share of the government (as promoter) in listed companies reached a 7-year high of 10.38%, likely due to the strong performance of several Public Sector Undertakings (PSUs).

Private promoter holdings fell to a 5-year low of 41%, attributed to factors like stake sales to capitalize on bullish markets, lower promoter holdings in new IPOs, and overall market institutionalization.

Retail investor and HNI (High Net-worth Individual) participation remained relatively flat, with a slight decrease in their combined share from 9.64% to 9.50%.

Pranav Haldea, Managing Director of PRIME Database Group, believes DIIs are poised to surpass FIIs as the dominant investor group in the coming quarters. This trend suggests a maturing Indian stock market, less reliant on foreign capital inflows, and potentially more stable in the long run.

There were 16 companies in which the trinity of promoters, FIIs and DIIs all increased their stake during the quarter these being (in descending order by market capitalisation) Jai Balaji Industries, Welspun Corp., Ramkrishna Forgings, Star Cement, Man Infraconstruction, Share India Securities, Time Technoplast, Yatharth Hospital & Trauma Care Services, Thangamayil Jewellery, Ajmera Realty & Infra India, Panama Petrochem, Bigbloc Construction, AGS Transact Technologies, Trucap Finance, Khadim India and Mold-Tek Technologies.