Foreign institutional investors (FIIs) as on today (Friday) own about 19% of Sensex stocks, which is equal to combined ownership of mutual funds, insurance and retail investors. While retail investors own 8.2% of Sensex stocks, insurers and mutual funds own 7.4% and 4%.
In the last two bull markets, retail investors seem to have lost out on the hold on the markets. While during the 2003-2008 bull rally, FII invested around $7-10 billion each year into Indian equity markets. In 2010, they invested a record $29.3 billion. The result has been increase in relative ownership stakes. For instance, as per latest available ownership data (as on December 31), in 12 of 30 stocks, FII ownership is above 20%. HDFC (59%), ICICI Bank (39.2%), Infosys Tech (36.6%), Hero Honda (33.5%) and Hindalco (29.8%) are among the stocks in which FII have higher equity stakes.
Sensex?s total market capitalisation of $ 630 billion constitutes a significant 43% of overall market capitalisation of the Indian stock market. Of this, $115 billion is owned by FIIs. Ever since the equity market was opened in the early 90?s, FIIs have put in close to $100 billion on a net basis. They have been net buyers in almost all years. From that perspective, higher FII stakes in top Indian firms shouldn?t be a worrying factor.
What?s worth noticing is that retail investors own about $50 billion in Sensex stocks which is more than what insurers and MFs hold. If retail investors are distinguished as those investing up to a lakh and those above, the former have the major portion. While about $42 billion was held by investors holding less than a lakh, around $8 billion constituted the others. It seems we have to increase the pool of direct equity investors if India has let its retail investors benefit from its growth story.