Domestic MFs holding in NSE-listed cos hits fresh high in Q4; FIIs stake at 11-yr low

The share of domestic mutual funds (MFs) in companies listed on the National Stock Exchange (NSE) rose to yet another all-time high of 8.92% in the March quarter of 2024, from 8.81% as of December 31, 2023. This was driven by strong net inflows of ₹81,539 crore during the quarter, as per the latest data released by PRIME Database, one of India's leading providers of data on the capital market.

Life Insurance Corporation of India (LIC), the country’s largest institutional investor, raised its share (across 280 companies where it holds more than 1%) to 3.75% as of March 31, 2024, from 3.64% as of December 31, 2023. Given that LIC commands the lion’s share of investments in equities by insurance companies (at least 70% share or ₹14.29 lakh crore), the overall share of Insurance companies went up from 5.37% to 5.40% during the March quarter of 2024, PRIME Database says in its report.

With this, the share of domestic institutional investors (DIIs) in NSE-listed companies as a whole increased to 16.05% from 15.96% during the quarter, aided by net inflows of ₹1.08 lakh crore.

On the other hand, the share of foreign institutional investors (FIIs) declined to an 11-year low of 17.68% as of March 31, 2024, down by 51 basis points (bps) from 18.19% as of December 31, 2023.

As a result, the gap between FII and DII holding narrowed further to an all-time low in this quarter with DII holding now being just 9.23% lower than FII holding. “The widest gap between FII and DII holding was in the quarter ending March 31, 2015, when DII holding was a staggering 49.82% lower than FII holding. "The FII to DII ownership ratio also decreased to an all-time low of 1.10 as of March 31, 2024, from an all-time high of 1.99 in the quarter ending March 31, 2015,” the report notes. 

According to Pranav Haldea, Managing Director, PRIME Database Group, Indian markets are moving towards Atmanirbharta (self-reliance) with the share of DIIs set to overtake that of FIIs in the next few quarters.

He says that for years, FIIs 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. “Markets would tank when FIIs would pull out. This is no longer the case. DIIs along with retail investors have now been playing a strong counterbalancing role.”

The data showed that DIIs raised their allocation most to energy sector companies (from 6.70% of their total holding as of December 31, 2023, to 7.77% of their total holding as of March 31, 2024), while they decreased their allocation most to information technology (IT) from 9.25% to 8.41%. 

FIIs increased their allocation most to consumer discretionary companies from 15.03% to 16.27% in March 2024, while they decreased their allocation most to financial services to 28.39% from 30.90% as of December 31, 2023.

Meanwhile, the share of the government (as promoter) increased to a 7-year high of 10.38% as of March 31, 2024, on the back of the strong performance of several PSUs. On the other hand, the share of private promoters declined to a 5-year low of 41% as of March 31, 2024. In the last 18 months, it has fallen by 361 basis points from 44.61% on September 30, 2022.

The stake sales by promoters to take advantage of bullish markets, relatively lower promoter holding in some of the IPO companies and also the overall institutionalisation of the market has resulted in this, says Haldea.

The share of retail investors (individuals with up to ₹2 lakh shareholding in a company) decreased marginally to 7.50% as of March 31, 2024, from 7.58% on December 31, 2023. The share of High Net Worth Individuals (HNIs) (individuals with more than ₹2 lakh shareholding in a company) too dropped marginally to 2% from 2.06% during the period under review. The combined retail and HNI share declined to 9.50% as of March 31, 2024, from 9.64% as of December 31, 2023.

As per the PRIME Database, there were 16 companies in which the trinity of promoters, FIIs and DIIs all increased their stake during the quarter these being (in descending order by market capitalisation) Jai Balaji Industries, Welspun Corp., Ramkrishna Forgings, Star Cement, Man Infraconstruction, Share India Securities, Time Technoplast, Yatharth Hospital & Trauma Care Services, Thangamayil Jewellery, Ajmera Realty & Infra India, Panama Petrochem, Bigbloc Construction, AGS Transact Technologies, Trucap Finance, Khadim India and Mold-Tek Technologies.

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