FII holding in India Inc hit a record high of 25% in Q4

Promoters' stake declined to 49.3 per cent in the same period

Foreign institutional investors (FIIs) continue to drive Indian equities. In the March quarter, FIIs have invested Rs 21,921 crore ($3.6 billion), owning a quarter of the top 75 listed stocks of India. During the quarter, their stakes have risen by 33 basis points sequentially.

Analysts track the quarterly ownership data to track purchases and preferences of large institutions both in terms of sectors and specific stocks. Foreign institutions benchmark their investments against the MSCI Emerging Market Index.

As far as the broader market is concerned, their stakes have risen by 17  basis points to 22.3 per cent in the 1,200 companies listed on the National Stock Exchange (NSE).

Morgan Stanley, which has analysed the change in ownership pattern of Indian equities in the March quarter, says FIIs’ stakes in Indian companies have  hit a record high. The estimated value of FII holdings in India stands at $279 billion. Taking a cue from FIIs, domestic institutions too have turned buyers with their stakes rising by 30 basis points in the three months ended March. The only category that has reduced their stakes are promoters and their stake has declined 98 basis points to 49.3 per cent during the quarter.

The steady buying by FIIs and domestic institutions has taken their average sector positions to a five-year high. Ownership data suggests that FIIs remain bullish about financials, consumer discretionary and telecom. They are underweight in technology and healthcare. Holdings in financials have hit a eight-and-a-half-year high, while stakes in consumer staples have hit a five-year low. Morgan Stanley says domestic institutions added most positions in financials and reduced positions the most in materials and technology.

The stock that has been sold by both categories of institutional investors — FIIs and DIIs — is Infosys, while State Bank of India remained the most bought stock. The names most heavily purchased by FIIs were Axis Bank and Tata Steel, whereas Glaxo and Tata Power were the most sold. FIIs are overweight on ICICI Bank but were underweight on Reliance Industries. Currently, FIIs own 5.4 per cent of RIL against the stock’s weightage of 7.9 per cent on the MSCI Index.

FIIs have remained overweight (wherein they own higher percentage of stocks compared to their weight on MSCI Index) three out of the 10 MSCI sectors, with financials in lead position, followed by consumer discretionary and telecoms. The biggest underweight positions are in energy, consumer staples and technology.

Going by the inflows in April, the pattern of foreign inflows might continue. In the month of April, the investments of FIIs into Indian equities stood at Rs 10,182 crore. Kotak Institutional Equities, which analyses fund flows into emerging markets, says, “Allocations to India by GEM funds reached 10.5 per cent in March, indicating an overweight status for the region. Net asset allocations to China and Russia have dropped over the past four weeks; Indonesia and Brazil saw the largest upsurge.”