Foreign portfolio investor ownership in Indian equities fell to a 16-year low in the March quarter, while domestic investors raised their shareholding to a record 29%, according to Morgan Stanley research released on April 24.
The shift points to a change in who owns listed Indian companies. Domestic institutions and households increased holdings, helping offset weaker foreign participation. Morgan Stanley said resilient local flows and lower foreign positioning could support demand for primary issuances and a pick-up in buybacks.
Domestic ownership in the listed universe rose 40 basis points from the previous quarter. The increase was led by domestic institutions, which raised ownership by 58 basis points to 19.3%. Direct household ownership also increased, rising 20 basis points.
By contrast, FPI holdings fell 90 basis points during the quarter, taking foreign ownership to its lowest level in 16 years, the report said.
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Sector Positions
Morgan Stanley said active sector positions rose for both foreign and domestic institutional investors, though from a low base. It said foreign investors continued to run more active portfolios than domestic institutions.
The report said institutions were overweight financials and consumer discretionary shares and underweight materials, energy, health care and utilities.
Foreign investors held their largest overweight position in financials, although they reduced active positions during the quarter. Industrials remained their biggest underweight position.
Domestic institutions had their largest underweight position in financials, though that underweight position narrowed. Consumer staples remained their largest overweight position.
The report added that communication services, industrials, health care and materials were sectors where domestic institutional positions were aligned with its market view.
Top Holdings
Among the top 20 aggregate institutional holdings, active positions relative to the MSCI Index increased the most for SBI and fell the most for ITC during the March quarter, Morgan Stanley said.
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