Foreign Institutional Investors (FII) continued to trim their stake in domestic stock markets in the January-March quarter, pulling out $13.5 billion from domestic stocks and reducing their holdings in the Nifty 500 to a multi-quarter low. Data sourced by brokerage firm Motilal Oswal showed that FII holding in Nifty 500 was down 40bp sequentially and down 210bp on year to 20.3% in the last quarter of the previous fiscal year. On the other hand, Domestic Institutional Investors (DII) were net buyers and pumped in $11.5 billion into equities during the same period.
Analysing FII ownership
Analysts at Motilal Oswal said that FIIs reduced their ownership in 60% of Nifty 500 companies on-quarter basis and 72% of Nifty-50 companies during the same period. “The FII-DII ownership ratio in the Nifty 500 declined to 1.4x in the January-March quarter,” they added. The ratio has come down from 1.6x in the January-March quarter of the financial year 2020-21. Analysts added that BFSI’s (Private Banks, NBFCs, Insurance, and PSU Banks) underperformance has continued to reflect in FII allocation — down to 34.2% (at a multi-quarter low) in the Nifty-500 as of March 2022, from 45.3% in December 2019 and 40.1% in March 2020.
FIIs holdings now suggest that foreign investors have assigned the highest weightage to private banks at 20.2%, followed by Technology (14%), Oil & Gas (12.2%), NBFC (11%), and consumer sector(6.7). The lowest allocation is towards PSU Banks at 1.2%, followed by Real Estate Consumer Durables, Cement, and Insurance. FIIs increased their holdings in only five sectors last quarter, these included — Metals, Telecom, Utilities, PSU Banks and Chemicals.
Domestic Institutional Investors increase holdings
During the January-March quarter, DIIs raised their stake in 58% of Nifty 500 companies and 72% of Nifty-50 companies, when compared to the previous quarter. In the Nifty 500 universe of stocks, Private Bank stocks have the highest weightage assigned to them by DIIs at 15.1%, followed by Technology (11.2%), Oil & Gas (10.4%), and the consumer sector at 8.8%.
“In the January-March quarter, DIIs increased their weights in the following sectors: Oil & Gas (+80bp), Utilities (+60bp), Metals (+40bp), Private Banks (+30bp), Telecom (+20bp), PSU Banks (+20bp), Real Estate (+10bp), and NBFCs (+10bp), while they reduced their weights in Technology, Healthcare, Cement, Automobiles, Capital Goods, Consumer, Retail, Consumer Durables, and Insurance, sequentially,” analysts said. The top 5 stocks owned by DIIs, by holding value were Reliance Industries Ltd ($33 billion), ICICI Bank ($24.5 billion), HDFC Bank ($21.8 billion), Infosys ($18.2 billion), and ITC ($17.5 billion).