Domestic Mutual Funds Fill In For Foreign Investors Exiting Indian Equities
Foreign portfolio investors have significantly reduced their holdings in Indian equities, driving their ownership share to a 13-year low, according to a recent report by the National Stock Exchange. This exodus has been largely offset by a surge in investments from domestic mutual funds, which have reached a record high ownership stake.
The NSE report, analysing ownership trends in listed companies, reveals a notable shift in the composition of investors in India Inc. FPI ownership in NSE-listed companies dropped to 17.4% in the December quarter, the lowest since 2011, reflecting substantial outflows amounting to $11.9 billion. This decline was particularly pronounced in large-cap stocks, as FPI ownership in the Nifty 50 also hit a multi-year low.
In contrast, domestic mutual funds have aggressively increased their investments, fuelled by consistent Systematic Investment Plan inflows. Their share in NSE-listed companies reached a record 10%, with active funds contributing 8.1% and passive funds 1.8%. DMFs injected a record net amount of Rs 1.5 lakh crore in the December quarter, demonstrating their growing influence in the market.
The report also highlighted a marginal increase in direct ownership by individual investors, reaching a 70-quarter high of 9.8%. Combined with their investments through mutual funds, individual investors now hold a record 18.2% of the market capitalisation, surpassing FPI ownership for the first time since 2006. This underscores the increasing participation of retail investors in the Indian equity market.
The report further noted a decline in promoter ownership, particularly in government holdings, and a shift in portfolio allocation away from Nifty 50 companies towards mid and small-cap stocks. This trend reflects the relative outperformance of these segments and the widening exposure of both institutional and individual investors.
The changing dynamics of ownership in India Inc. highlights the growing resilience of the domestic market, with domestic mutual funds and individual investors playing an increasingly crucial role in absorbing selling pressure from FPIs.
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