India Inc. promoter holdings continue to fall, but experts see no red flags

Promoter ownership in domestic companies has declined to the lowest level since the September quarter of 2017, but market experts say the trend is largely market-driven and does not point to any governance-related concerns.

 

In the NSE 500 universe, private promoters’ share of overall holdings has dropped to 39.6 per cent in the March quarter so far, the lowest level since the September quarter of 2017, according to data from Primeinfobase.com. In December 2024, private promoter holdings in the broader universe stood at 39.76 per cent, declining slightly to 39.6 per cent in the quarter under review. 

 

Among the non-PSU Nifty 50 companies, promoter holdings currently stand at 34.4 per cent, the lowest since June 2017, as per the latest data.  There are no governance concerns here as the regulations are strong, said Chokkalingam G, founder of Equinomics Research. He explained that the recent decline in promoter holdings is largely driven by market dynamics, particularly elevated valuations following an unprecedented bull run in calendar year 2024. “Some stocks became extraordinarily overvalued. For instance, metal stocks that typically traded at 8 to 11 times earnings were suddenly valued at 25 to 35 times. This created an opportunity for promoters to offload shares,” he said.

 

According to Chokkalingam, promoter selling at such high valuations should not be viewed with suspicion but rather as a signal for investors to assess price levels more carefully. “Promoters understand their businesses better than most investors. If they are selling at a certain level, that price should serve as a reference point in the next market cycle,” he added.

 

The reduction in the holdings comes in a quarter that was marked by a correction in the market triggered by global funds outflows amid valuation and trade war-related concerns. During the March quarter, the benchmark Nifty50 and the 30-stock Sensex saw a decline of 0.5 per cent and 0.9 per cent, respectively. Meanwhile, the Nifty midcap and small-cap indices fell by 13 per cent in the quarter.

 

A lower promoter holding does not necessarily indicate a negative outlook for a company, said Deven Choksey, Managing Director of DRChoksey FinServ Pvt. Ltd. The very purpose of a company getting listed on the exchanges is to dilute its stake in order to raise funds. As long as companies receive the right valuation for the stake they offload, it should not be a concern.

 

He added, one needs to consider the market capitalisation of the company to assess whether promoter offloading is an issue. There would be no red flag if a large-cap company reduces its holding, but it could raise concerns for a small-cap firm. 

 

Shift in tide: DIIs versus FIIs

 

This shift comes when, for the first time that domestic institutional investors (DIIs) now own a larger share of India’s top 500 listed companies than foreign institutional investors (FIIs), marking a structural realignment in India’s capital markets.

 

As of March 2025, DIIs held an 18.4 per cent stake in Nifty 500 companies, surpassing foreign institutional investors (FIIs), whose ownership declined to 18.16 per cent. The FII-DII ownership ratio, which once stood at approximately 1.5 times in September 2021, fell to 0.99 times in the March quarter, highlighting the rising influence of domestic capital in Indian equities.

 

According to a note by Motilal Oswal, DIIs increased their holdings across 18 of 24 sectors, with the highest inflows going to banks (private and PSU), consumer durables, technology, cement, insurance, oil and gas, and automobiles—sectors seen as long-term structural plays.