The Indian stock market appears to be moving towards greater self-reliance, as evidenced by the gradual increase in the share of domestic investors. The shareholding of domestic investors in the Indian markets reached an all-time high of 25.85 per cent as of June 30, 2024. Meanwhile, the holdings of foreign investors have declined to a 12-year low, a report from PRIME Database showed.
“Indian markets are rapidly moving towards Atmanirbharta (self-reliance) with the share of DIIs set to overtake that of FIIs in the next few quarters. 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. This is no longer the case,” said Pranav Haldea, Managing Director, PRIME Database Group.
Domestic Institutional Investors (DIIs) along with retail investors (individuals with up to ₹2 lakh shareholding in a company) and High Net Worth Individuals (HNIs) (individuals with more than ₹2 lakh shareholding in a company) have now been playing a strong counterbalancing role with their share reaching an all-time high of 25.85 per cent as on June 30, 2024, he noted.
The share of DIIs as a whole increased to 16.23 per cent from 16.07 per cent during the quarter. On the contrary, Foreign Institutional Investors (FIIs) pulled out ₹7,693 crore from the Indian stock market during the quarter ended June 2024, leading to a decline in their share to a 12- year low of 17.38 per cent from 17.72 per cent in the March quarter.
This has resulted in the gap between FII and DII holding narrowing to its lowest-ever level with DII holding now being just 6.60 per cent lower than FII holding. The FII to DII ownership ratio also decreased to an all-time low of 1.07 at the end of June 2024 quarter from an all-time high of 1.99 in the quarter ending March 31, 2015.
The share of domestic mutual funds (MFs) in NSE-listed companies rose to an all-time high of 9.17 per cent as on June 30, 2024, from 8.93 per cent as on March 31, 2024, led by strong net inflows of ₹1.09 lakh crore during the quarter, as per a report by PRIME Database.
The share of retail investors reached an all-time high of 7.64 per cent as on June 30 from 7.52 per cent on March 31, while the share of HNI investors decreased slightly to 1.98 per cent from 2 per cent, QoQ. As such, the combined retail and HNI share increased to 9.62 per cent from 9.52 per cent, the data from PRIME Database showed.
Meanwhile, Life Insurance Corporation of India (LIC), India’s largest institutional investor, saw its share (across 282 companies where its holding is more than 1 per cent) decreasing to an all-time low of 3.64 per cent in Q1FY25 from 3.75 per cent in the previous quarter.
“This was despite net buying by LIC of ₹12,400 crore during the quarter. Given that LIC commands a lion’s share of investments in equities by insurance companies (at least 70 per cent share or ₹15.72 lakh crore), the overall share of insurance companies also went down from 5.40 per cent to 5.23 per cent during the quarter," Haldea said.
The Indian government’s stake as promoter increased to a seven-year high of 10.64 per cent as on June 30 on the back of strong performance of several PSUs. Conversely, the share of private promoters declined to a five-year low of 40.88 per cent.
“Stake sales by promoters to take advantage of bullish markets, relatively lower promoter holding in some of the IPO companies and overall institutionalisation of the market have resulted in this,” said Haldea.
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