Domestic institutional investors (DIIs), including mutual funds, insurance companies, and pension funds, have time and again proven that they have an enviable track record in finding companies with strong fundamentals and sustainable growth potential. All that while maintaining significant ownership positions through market cycles.
These institutions' investments are very important to track as they more often span beyond simple ownership percentages. Their stakes signal confidence in a company's long-term prospects, management pedigree, and overall business sustainability.
Foreign institutional investors (FIIs) are more sensitive to global factors and might act accordingly. But DIIs usually showcase a much deeper commitment to their investments, enduring market volatility while continuing to focus on fundamental strengths and growth potential.
Here are five stocks that have proven to be DII darlings, with over 45% of their available equity shares held by them.
It has a 95.9% share in the commodity futures market as of 2023-24. It controls a 100% share of precious metals and stones, 99.61% of energy, and 99.80% of base metals.
With a market cap of ₹33,462 crore and a current DII holding of over 57%, Multi Commodity Exchange of India Ltd (MCX) is the first entry on our list.
Here is a look at the DII holding over the last five years:
The holdings saw a gradual increase from 40.02% in 2018-19 to 57.24% in 2023-24. This growing interest could be driven by many factors.
One of them could be the company’s association with Central Depository Services Ltd (CDSL), as it entered into an agreement with the latter and CDSL Repository Ltd (CCRL) to set up and operationalize a new repository.
Among the top three DIIs that have invested in the company, Kotak Mahindra Bank Ltd holds 15% of the shares, while Parag Parikh Flexi Cap Fund holds 4.98% and HSBC Large Cap Fund holds 4.89%.
The company’s sales grew at a compounded rate of 18% in the last five years from ₹300 crore to ₹684 crore.
The profits tell another story as the profit after tax (PAT) dropped from ₹146 crore in 2018-19 to ₹83 crore in 2023-24.
At a current price of ₹6,561, the stock has seen a jump of 513% from its five-year-old price of ₹1,070.
The stock is trading at a P/E of a huge 192x, which could be a red flag for investors. The 10-year median P/E is 41.7x.
MCX plans to grow volumes substantially by launching new products like serial contracts, index options, 10g monthly gold futures, cotton seed wash oil, crude sunflower oil contracts and many more which are in the pipeline.
Whether all these ideas keep the DIIs interested in the company or even increase their exposure, only time will tell.
On number two, we have an over 75-year-old leading consumer company in India that is revamping itself.
With a market cap of ₹26,328 crore and a DII holding of a little over 51%, Crompton Greaves Consumer Electricals Ltd deserves to be on this list.
Let’s take a look at how the DII holding for the company has panned over the last five years:
From 18.90% in 2018-19 to 51.63% in June 2024, the holding has jumped by a huge 170%.
The company saw some major changes in promoter holding in the same period, as the promoter holding, which was 34% in 2018-19, has dropped to 0% in June 2024.
Among the top three DIIs that have invested in the company, HDFC Business Cycle Fund holds 9.3% of the shares, while Mirae Asset Balanced Advantage Fund holds 4.96% and Nippon India Value Fund holds 5.4%.
The company’s sales grew from ₹4,479 crore in 2018-19 to ₹7,313 crore in 2023-24, making it a compounded growth rate of 10% in the last five years.
The profit after tax was ₹401 crore, which grew at a compounded rate of 2% in the last five years to ₹442 crore in 2023-24.
The current share price is ₹409, a 54% jump from its five-year-old price of ₹266.
The stock is trading at a P/E of 56x, while the 10-year median P/E is 39x.
The company is in a revamp mode and looks forward to making a dent with Crompton 2.0. It spent ₹92 crore on advertising and promotion in Q2 and Q3FY24.
Crompton 2.0 will focus on premiumization, go-to-market excellence, brand investments and innovation.
At number three, we have one of India’s top 20 IT services companies, which provides end-to-end software solutions and services.
With a market cap of ₹48,089 crore, Coforge Ltd, earlier known as NIIT Technologies Ltd, secures a definite spot in this list with a DII holding in its total available equity of 47.3%.
In 2019, NIIT and its founder's family sold their 30.2% stake to Hulst B.V., which subsequently acquired an additional ~40% through an open offer, reaching a 70% stake.
Hulst, however, sold off its entire stake by September 2023.
Here is how the DII holdings have looked over the last five years:
The DII holdings grew from 16.05% in 2018-19 to 47.29% in June 2024.
The company's workforce was 8,000 people in 2016, and it was slightly over 24,000 by December 2023.
Coforge also has big expansion plans, which it reiterated with the acquisition of Cigniti Technologies in May 2024. It expects to become a $2 billion revenue company by 2026-27.
Among the top three DIIs invested in the company, HDFC Midcap Opportunities Fund holds 6.44% of the shares, while Life Insurance Corporation of India holds 5.88% and SBI Large & Midcap Fund holds 4.13%.
The company’s sales grew from ₹3,676 crore in 2018-19 to ₹9,179 crore in 2023-24, growing at a compounded growth rate of 20% in the last five years.
The profits after tax was ₹422 crore, which grew at a compounded rate of 15% in the last five years to ₹826 crore in 2023-24.
The current share price is ₹7,210, which is a 404% jump from its five-year-old price of ₹1,430.
The stock is trading at a P/E of 62x, while the 10-year median P/E is 22.5x.
During Q4FY24, Coforge signed two large deals. A $400 million TCV ten-year deal in the BFS vertical and a $55 million three-year transformation deal in the insurance vertical.
With strategic partnerships with tech giants such as Microsoft, Amazon Web Services, Google, SalesForce, etc., as of 2023-24, the company has an order book of ~$1,900 million.
At number four is a leading bank in India that provides retail and corporate banking, para-banking activities, treasury and foreign exchange business. It is the second-largest bank and the largest private sector bank in Kerala.
With a market cap of ₹47,898 crore, Federal Bank, incorporated in 1931 as Travancore Federal Bank Ltd, records a DII holding in its total available equity of 47%.
Here is how the DII holdings have looked in the last five years:
The DII holdings grew from 29.73% in 2018-19 to 45.16% in 2023-24.
The bank operates a network of 1,418 branches and 1,962 ATMs. It added 65 new branches in 2023-24.
Among the top three DIIs invested in the company, HDFC Mutual Fund holds 6.93% of the shares, while Life Insurance Corp. of India holds 3.31% and Mirae asset Mutual Fund holds 3.69%.
The company’s revenue grew from ₹11,635 crore in 2018-19 to ₹23,565 crore in 2023-24, growing at a compounded growth rate of 15% in the last five years.
PAT was ₹3,964 crore, which grew at a compounded rate of 24% in the last five years to ₹1,318 crore in 2023-24.
The current share price is ₹195, which is a 132% jump from its five-year-old price of ₹84.
The stock is trading at a modest P/E of 11.9x, and the 10-year median P/E is also 11.1x.
The bank has achieved significant digital transformation, with 94% of all transactions (both retail and corporate) now conducted through digital channels. Digital transactions have surged, showing robust year-on-year growth of 71%, highlighting the bank's successful shift towards digital banking solutions.
In July 2023, the bank raised ₹3,040 crore as capital via QIP (qualified Institutional placement).
Closing the list at number five is a global EPC player with diversified interest in power transmission and distribution, oil and gas pipeline, railways and biomass based power generation.
With a market cap of ₹21,031 crore and a DII holding of 45.6%, Kalpataru Projects International Ltd is our last entry in the list.
The promoter holding saw a drop from 59.32% in 2018-19 to 40.59% in 2023-24.
Meanwhile, here is how the DII holdings have looked over the last five years:
The DII holdings grew from 25.28% in 2018-19 to 43.64% in 2023-24.
The company has a footprint across 70 countries with ongoing projects across 30+ countries across America, Africa, Europe, Middle East, and the Asia Pacific.
Among the top three DIIs invested in the company, HDFC Flexicap Fund holds 9.76% of the shares, while ICICI Prudential Equity & Debt Fund holds 8.87% and SBI Small Cap Fund holds 9.15%.
The company’s sales grew from ₹1,414 crore in 2028-19 to ₹1,814 crore in 2023-24, growing at a compounded growth rate of 13% in the last five years.
PAT was ₹487 crore, which grew at a compounded rate of 2% in the last five years to ₹516 crore in 2023-24.
The current share price is ₹1,295, which is a 191% jump from its five-year-old price of ₹445.
The stock is trading at a P/E of 43.9x, while the 10-year median P/E is 24.5x.
In July 2023, the company acquired a 51% stake in Fasttel Engenharia S.A., Brazil.
As of Q1FY24, the company has an order book of ~ ₹47,300 crore.
We looked at five companies today that boast of some strong financials and standing, and in which DIIs held unusually large stakes.
While it would seem like a good strategy to follow the movements of these institutions to make the most of the opportunities they see in these companies, it may also turn out to be a risky approach.
Because the holdings you see today are not bought recently. These DIIs have been investing in these companies for years, and have seen various market cycles. Plus they have the backing to rough any market weather unlike individual investors.
So, with that said, it may still help to study these companies and add them to your watchlist. Perhaps the learnings from these companies could help you identify the next DII favourite stock.
Note: We have relied on data from www.screener.in and www.trendlyne.com throughout this article. Only in cases where the data was not available have we used an alternative but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading equity research organisation based in Mumbai as the head of sales and marketing. Presently, he is spending most of his time dissecting the investments and strategies of the super investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
