Foreign institutional investors (FII) have been the largest non-promoter investor category in Indian stock markets. But, that is expected to change soon. Fuelled by a surge in investments flowing into mutual funds, domestic institutional investors (DII) could overtake their foreign counterparts in coming quarters.
According to data from primeinfobase.com, an initiative of equity market tracker Prime Database, the share of domestic mutual funds in companies listed on the NSE rose to an all-time high of 8.92 per cent as of March 31, 2024, up from 8.81 per cent as of December 31, 2023. This was powered by the strong net inflows of Rs 81,539 crore, the funds have seen during the quarter.
Overall, the share of DIIs (includes mutual funds, insurance companies, pension funds, banks, NBFCs, asset reconstruction companies etc) as a whole, increased to 16.05 per cent from 15.96 per cent in the same period with net inflows of Rs 1,08,434 crore, the data showed.
At the same time, the share of FIIs has declined to an 11-year-low of 17.68 per cent as of March 31 this year, compared with 18.19 per cent as of December 31, 2023. The gap between FII and DII is now at an all-time low, with DII holding now just 9.23 per cent lower than the FII holding. Back in the quarter ended March 31, 2015, the DII holding was a staggering 49.82 per cent lower than the FII holding.
"Indian markets are moving towards 'atmanirbharta' (self-reliance) with the share of DIIs set to overtake that of FIIs in the next few quarters," said Pranav Haldea, Managing Director, PRIME Database Group.
For years, FIIs have been the largest non-promoter shareholder category in the Indian market and whenever they pulled out money, stocks used to crash. That is no more the case.
"DIIs along with retail investors have now been playing a strong counterbalancing role," pointed Haldea.
DIIs increased their allocation most to the energy sector from 6.70 per cent of their total holding as of December 31, 2023, to 7.77 per cent of their total holding as of March 31, 2024. At the same time, they decreased their allocation most to information technology companies from 9.25 per cent to 8.41 per cent.
Meanwhile, FIIs increased their allocation most to consumer discretionary companies from 15.03 per cent to 16.27 per cent in the same period, while they decreased their allocation most to financial services from 30.90 per cent to 28.39 per cent.
As the markets have surged and shares of several public sector undertakings have skyrocketed, the share of the Government as a promoter has increased to a 7-year high of 10.38 per cent as of March 31, 2024. But, in the private sector, promoters took advantage of the bullish markets to pare some of their stake; their stake fell to a 5-year low. In the past 18 months, the share of private promoters has declined from 44.61 per cent on September 30, 2022, to 41 per cent on March 31, 2024.
India's largest institutional investor Life Insurance Corporation of India (LIC), saw its share across 280 companies where its holding is more than 1 per cent increasing to 3.75 per cent as of March 31, 2024, from 3.64 per cent as of December 31, 2023, according to primeinfobase.com.
