MFs gain larger share in June quarter; FPIs drop to lowest in 4 years

In the past three years, mutual funds’ (MFs) equity investments have accelerated even as foreign portfolio investors (FPI) inflows have seen massive de-growth from the FY15 peak. This reflects in the latest June quarter shareholding data, where MF ownership in the top 200 stocks — which account for 75 per cent of India’s market capitalisation — has scaled new highs, while that of FPIs has dropped to its lowest level in four years. For the quarter ended June 2018, MF holding in BSE200 firms stood at 6.42 per cent, up 2.4 times in four years. 

On the other hand, FPI holding in BSE200 firms is at 23.8 per cent, lowest in four years. Since 2014, MFs have pumped in Rs 3.4 trillion into domestic stocks, about 83 per cent more than FPIs’ investment. 

While MF ownership is still a fourth of FPIs, given the structural uptrend in domestic equity flows, experts believe it is only a matter of time before this gap narrows further. MF holdings in domestic stocks is more broad-based as compared to FPIs. For instance, only 10 stocks account for half of the FPI equity holdings in India. In comparison, MF holdings in the top 10 stocks account for only a third of their portfolio.  Life Insurance Corporation (LIC) of India, a major institutional investor, holds 4.9 per cent in BSE200 stocks, compared to its long-term average of 5.1 per cent. 

LIC’s top 10 holdings are in stocks owned either by the government or where the government has equity interest. In terms of sectors, banking is over-owned for FPIs — 550 basis points (bps) more than the sector’s weight in the BSE200 index. For MFs, the most overweight (OW) sector is industrials, while for LIC it is energy. The biggest underweight (UW) for FPIs and MFs is consumer, while for LIC it is banking, data analysed by Kotak Institutional Equities showed.