Domestic institutions now own nearly as much of Indian equities as foreign investors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The ownership gap between foreign and domestic institutional investors has narrowed to the lowest ever in the March quarter as foreign institutional investors (FIIs) continued to trim their exposure in Indian equities.

Foreign investor holdings in NSE-listed companies fell to an 11-year low of 17.7% during the March quarter. On the flip side, the growing enthusiasm among domestic investors has not only pushed the overall domestic investor holding to 16.1%, but taken the holdings by domestic mutual funds to an all-time high of 8.9%.

At the end of the March quarter, the difference between the FII and DII ownership of Indian equities stood at 1.6%, compared to a 10.3% gap recorded in March 2015, which was twice the domestic investor holdings at that time, according to data from PrimeInfobase.

Pranav Haldea, Managing Director of Prime Database said that the share of DIIs will overtake that of FIIs in the next few quarters. “Markets would tank when FIIs would pull out, but that is no longer the case now,” he said, adding that DIIs and retail investors have played a strong counter balancing role.

Foreign Investors bought Indian shares worth $1.4 billion on a net basis during the March quarter.

In comparison, domestic institutions, including Mutual Funds and other financial institutions bought shares worth $13.1 billion during the same period, according to Bloomberg data.

The Nifty gained another 3% during the March quarter after surging over 10% during the December period. The index has gained for four quarters in a row.

During the March quarter, FIIs remained bullish on the energy space and also increased their allocation to consumer discretionary stocks, while trimming their exposure to IT. They reduced their allocation by the most in financial services.

On similar lines to foreign institutions, domestic investors also increased their allocation to the energy sector along with consumer discretionary and industrials, while trimming their exposure to financial services and FMCG stocks.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow