But domestic institutions up stake in 2008-09.
The share of foreign institutional investors (FIIs) in free-float market capitalisation of BSE and NSE 500 companies has dropped to 36.4 per cent as on March 2009 from 43 per cent a year ago and 46.3 per cent in 2006-07. In 2006, however, their holding in these companies had gone up to 50 per cent.
This significant decline is attributed to their persistent selling in the cash segment since May 2008 following the US subprime crisis.
The FIIs did not spare even the 30 Sensex companies in their distressed sell-off. So, their holding in the free-float market cap of Sensex companies dropped to 40.71 per cent from 45.8 per cent a year ago and 48.62 per cent in 2006-07. On the other hand, domestic institutions increased their holding from 19.86 per cent in FY2007 to 25.4 per cent in FY2009.
The domestic institutions, led by insurance companies and other financial institutions, including banks and mutual funds, lapped up the FII shares worth Rs 70,000 crore ($15 billion) between May 2008 and March 2009. These institutions made the most of this opportunity and absorbed the Rs 57,000 crore worth of FII shares. No wonder, the domestic institutions' share increased to 25.3 per cent from 22.5 per cent a year ago and 21 per cent in FY2007.
Foreign promoters seem to have absorbed the FII shares mostly through open offers as they jacked up their holding from 6.67 per cent in FY2008 to 8.15 per cent in FY09. Indian promoters, however, stayed away from the market and did not go for creeping acquisitions, despite market value of their companies declining by over 60 per cent from the peak level of January 8, 2008.
The FIIs were seen selling off their shares in sectors such as oil and gas, private and public sector banks, capital goods, pharmaceuticals, steel, engineering and diversified companies. Since financial performance of most of these sectors was related to general economic buoyancy and there were telltale signs of an economic downturn, FIIs resorted to distress selling.
The current rally, according to Gautam Chand, CEO of Instanex Capital, is largely fuelled by the domestic institutions, which have a significant say in the Indian market now than ever before. Also, the FIIs, after selling blue chips in FY09 to cope with redemption pressure abroad, are now compelled to buy stocks in the Indian market as it has recovered sharply by over 40 per cent since March 9, 2009 due to stimulus packages worldwide. This fact is reflected in the April figure as the FIIs have been net buyers worth Rs 5,560 crore in the month. Local institutions, on the other hand, have been net sellers worth Rs 782 crore in April.
