FIIs' Sensex ownership hits record high of 22.5% in June quarter

Foreign Institutional Investors' ownership in Sensex hit all-time high of 22.5% in the June quarter, a report says.

"The strong inflow from the FIIs over the past five years has resulted in the all-time high FII ownership of the domestic markets at 22.5% as of end June," Bank of America Merrill Lynch said in a report today.

As of end June, FIIs collectively held around 22.5% of the market and nearly 46% of the free float. This compares with around 15% of total market cap and 36% of free float in March 2009, it said.

However, the report said, "the top three stocks by value owned by FIIs remained the same -- HDFC, ICICI Bank and Infosys. The top three overweight stocks are ICICI Bank, HDFC Bank and Tata Motors".

HDFC Bank is a new entrant given the reduction in MSCI weight.

"The financials have been the biggest overweight for FIIs for a long time. However, the overweight in financials has seen a massive jump at 10.5 times (it is now 10.5%) due to reduction in MSCI weight of HDFC Bank due to FII restrictions," the report said.

Within financials, however, the government-owned banks are not well held as State Bank of India is under-owned. The report said the domestic mutual funds have seen positive inflows and have been buyers post-elections after being net sellers for past few months.

The top four underweight stocks for both FIIs and domestic MFs are the same - HDFC, Reliance, TCS and Infosys. Software and energy are the largest sector underweights for FIIs.

"The under-weight on energy is largely driven by Reliance, similar to the FIIs," BofAML said, adding unlike FIIs, the biggest sector overweight for domestic funds is industrials, where they have a massive 950 basis points overweight.