FPI ownership in NSE 500 companies hits 12-year low, slips to 18.8% in Q1: Report

The strong participation of retail investors through mutual funds has significantly altered the ownership dynamics of Indian-listed companies. A recent analysis by domestic brokerage firm DAM Capital showed that domestic institutional investors' (DIIs) ownership of the Nifty 500 companies reached a record high of 16.9% in the quarter ending in June.

Meanwhile, foreign portfolio investor (FPI) ownership continued its decline, falling to 18.8%—its lowest level in nearly 12 years. Compared to the March quarter, FPI ownership dropped by 30 basis points (bps) on a quarter-on-quarter (QoQ) basis, bringing the total value to USD 843 billion.

In the Nifty-50, FPI ownership saw a more pronounced decline of 40 bps QoQ in the June quarter, settling at 24.5%. In contrast, mid and smallcaps experienced modest increases of 22 bps and 15 bps, respectively, with current holdings at 16% for midcaps and 12.4% for smallcaps.

Significantly, the influence of FPIs in the Indian market has been waning. Since March 2021, FPI free float ownership has decreased each quarter, with only two instances of increases. As of June 2024, FPI free float ownership stands at 39%, down from a peak of 48%, the report showed. 

Conversely, domestic investors (DIIs and individuals) now control nearly 53% of the float, with DIIs accounting for around 35% and individual investors about 18%.

The brokerage points out that in every global market downturn post-COVID—whether caused by Fed rate hikes or geopolitical tensions—domestic investors have consistently offset FPI outflows. Since 2019, domestic holdings, including both DIIs and individual investors, have exceeded those of FPIs.

On a QoQ basis, DII ownership increased by 30 basis points, with stakes rising across large, mid, and small-cap segments. The largest increase was seen in largecaps (Nifty-50) at approximately 60 bps, bringing ownership to 20.7%.

Midcaps saw a rise of about 28 bps to 16.5%, while smallcaps increased by 16 bps to 12%. The total holding of domestic institutions is valued at USD 758 billion.

Retail investors, a growing and increasingly significant segment, hold an ownership stake of 8.7%, though this is slightly down from the peak of 9% seen in the March 2022 quarter. The mid-cap segment experienced the largest decline, with a drop of approximately 30 bps QoQ to 9.7%.

Nifty-50 holdings remained stable at 8.1%, while smallcaps saw a minor increase of around 10 bps to 9.3%. The total holding of individual investors is valued at USD 392 billion, according to the DAM Capital. 

Sectors in favour

The brokerage notes that FPIs and DIIs have both increased their stakes for four consecutive quarters in the capital goods, consumer services, power, and real estate sectors. Autos and telecom show similar trends, with minor reductions being the only exceptions.

In contrast, both FPIs and DIIs have decreased their stakes in FMCG for four straight quarters, while the financials sector has seen reductions for three consecutive quarters. There has been a turnaround in the chemical sector, where FPIs showed a minor stake increase after three quarters of selling.

Conversely, the healthcare sector has seen both FPIs and DIIs slightly reduce their stakes after three quarters of buying, indicating a loss of interest, it stated. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.