MFs tighten grip on domestic stocks; FPI-DII ownership gap narrows further

Their share in India's market hits fresh record high

Domestic mutual funds' (MFs’) share in the total market capitalisation of National Stock Exchange (NSE)-listed firms hit a fresh all-time high in the September 2024 quarter as they continued to pour funds into the equity markets.

 

As of September 30, MFs owned 9.5 per cent of the total market capitalisation of companies whose shares trade on the NSE, up from 9.2 per cent as of the June quarter, according to data from the Prime Database group. Between July and September, net inflows from domestic MFs were almost Rs 90,000 crore.

 

Meanwhile, the share of India's largest institutional investor, Life Insurance Corporation (LIC), declined to an all-time low of 3.59 per cent in the September quarter, down from 3.64 per cent at the end of June. The decline was primarily due to profit booking, with the insurance giant increasing its stake in 78 companies while reducing it in 103 firms. The data covers only companies where LIC has at least a 1 per cent stake.

 

 

Domestic institutional investors' (DIIs’) share also rose to an all-time high of 16.46 per cent, up from 16.25 per cent, with a net inflow of Rs 1.03 trillion during the quarter.

 

The share of foreign portfolio investors (FPIs) also rose to 17.5 per cent in September, up from 17.39 per cent at the end of the preceding quarter. However, FPI holding is expected to decline in October following a record Rs 97,408 crore pullout from domestic stocks. The FPI sell-off was more than offset by over Rs 1 trillion of investment by DIIs in October.

 

“The difference between the share of FPIs and DIIs reduced further and hit an all-time low of 1.09 per cent as of September 30, because DII share increased faster than FPI. Even in rupee value terms, DII holding of Rs 76.8 trillion is now just 6.19 per cent lower than FPI holding, another all-time low,” said Pranav Haldea, managing director of Prime Database.

 

Haldea added that with huge net outflows of FPIs in October, DII share has likely overtaken FPI share by now.

 

“For years, FPIs have been the largest non-promoter shareholder category in the Indian market, with their investment decisions having a huge bearing on the overall direction of the market. This is no longer the case. DIIs and retail and high net worth individual (HNI) investors have now been playing a strong counterbalancing role. While FPIs continue to remain an important constituent, their stranglehold on the Indian capital market has weakened. This was also evident in October, with the benchmark indices falling by just 6 per cent despite the large FPI sell-off,” said Haldea.

 

The share of the government (as promoter) declined to 9.71 per cent from 10.64 per cent during the September quarter. On the other hand, the share of private promoters increased to 41.34 per cent from 40.87 per cent in the June quarter, despite ongoing stake sales. Private promoters reduced their stake in as many as 465 companies during the quarter while increasing their stake in just 122 companies.

 

Promoters, FPIs, and DIIs increased their stake in 14 companies during the quarter. These include JSW Steel, Tata Consumer Products, Dabur, Indus Towers, Godrej Industries, Himadri Speciality Chemical, Jai Balaji Industries, Redtape, TTK Prestige, Saregama India, Suprajit Engineering, Meghmani Organics, Aarti Surfactants, and Mangalam Organics.