The gap between Foreign Institutional Investors (FIIS) and Domestic Institutional Investors (DIIS) with regard to their holdings in the Indian companies has narrowed further to hit an all-time low this quarter, according to a report by PrimeInfobase, an initiative of PRIME Database Group. The DIIs’ holding is now just 9.23% lower than FIIs holding in the Indian companies.

The share of FIIs has declined to an 11-year low of 17.68% as on March 31, 2024, down by 51 bps from 18.19% as on December 31, 2023, resulting in the gap between FII and DII holding narrowing further.

The widest gap between FII and DII holding was in the quarter ending March 31, 2015, when DII holding was a staggering 49.82% lower than FII holding. The FII to DII ownership ratio also decreased to an all-time low of 1.10 as on March 31, 2024 from an all-time high of 1.99 in quarter ending March 31, 2015.

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Share of domestic mutual funds in companies listed on NSE

The share of domestic mutual funds (MFs) in companies listed on NSE rose to yet another all-time high of 8.92% as on March 31, 2024, from 8.81% as on December 31, 2023, powered by strong net inflows of Rs 81,539 crore during the quarter.

Life Insurance Corporation of India (LIC), India’s largest institutional investor, too saw its share (across 280 companies where its holding is more than 1%) increasing to 3.75% as on March 31, 2024 from 3.64% as on December 31, 2023. Given that LIC commands a lion’s share of investments in equities by insurance companies (at least 70% share or Rs 14.29 lakh crore), the overall share of Insurance companies went up from 5.37% to 5.40% during the quarter.

The share of DIIs as a whole, with net inflows of Rs 1,08,434 crore, increased to 16.05% from 15.96% during the quarter.

Indian markets are moving towards ‘atmanirbharta’

According to Pranav Haldea, Managing Director, PRIME Database Group, “Indian markets are moving towards atmanirbharta (self-reliance) with the share of DIIs set to overtake that of FIIs in the next few quarters. For years, FIIs have been the largest non-promoter shareholder category in the Indian market with their investment decisions having a huge bearing on the overall direction of the market. Markets would tank when FIIs would pull out. This is no longer the case. DIIs along with retail investors have now been playing a strong counter balancing role.”

DIIs increased their allocation most to energy (from 6.70% of their total holding as on December 31, 2023 to 7.77% of their total holding as on March 31, 2024) while they decreased their allocation most to IT (9.25% to 8.41%). FIIs increased their allocation most to consumer discretionary (15.03% to 16.27%) while they decreased their allocation most to financial services (30.90% to 28.39%).

Meanwhile, the share of the government (as promoter) increased to a 7-year high of 10.38% as on March 31, 2024 on the back of strong performance of several PSUs. On the other hand, the share of private promoters declined to a 5-year low of 41% as on March 31, 2024. Over the last 18 months alone, it has fallen by 361 basis points from 44.61% on September 30, 2022.

According to Haldea, stake sales by promoters to take advantage of bullish markets, relatively lower promoter holding in some of the IPO companies and also overall institutionalization of market has resulted in this.

Share of retail investors in market

The share of retail investors (individuals with up to Rs 2 lakh shareholding in a company) decreased marginally to 7.50% as on March 31, 2024 from 7.58% on December 31, 2023. The share of High Net Worth Individuals (HNIs) (individuals with more than Rs 2 lakh shareholding in a company) too decreased slightly to 2% as on March 31, 2024 from 2.06% on December 31, 2023. As such, the combined retail and HNIs share declined to 9.50% as on March 31, 2024 from 9.64% as on December 31, 2023.