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FIIs/DIIs increase holding in Insurance and PSU Banks

According to the India Strategy Report by MotilalOswal Financial Services Limited (MOFSL), Equity markets witnessed a strong rally in CY21 with the Nifty-50 and NSE Midcap-100 up 28%/46% YTD’21. Within the NSE-500, FII and DII purchases showed divergent sequential trends. FIIs raised their holdings in Consumer Durables, Capital Goods, Oil & Gas, and Telecom on a QoQ basis, whereas DIIs decreased their holdings in these sectors. DIIs, on the other hand, increased their holdings in Automobiles, Private Banks, and Healthcare, while FIIs decreased their holdings in these sectors on a QoQ basis. FIIs and DIIs posted inflows of USD0.4b and USD4.2b, respectively in 2QFY22.

In this report, MOFSL dive deep into FII/DII ownership of the various sectors/companies in the Nifty500 to see how this changed in 2QFY22:-

FII holding in Nifty-500 remains unchanged QoQ

holding in the Nifty-500 remained unchanged QoQ but increased 40bp YoY to 21.6% in 2QFY22. DII holding in the Nifty-500 was down 20bp QoQ /80bp YoY to 13.8%.FIIs increased their ownership QoQ in 53%/40% of Nifty-500/Nifty-50 companies QoQ, while DIIs increased their stake QoQ in 48%/64% of Nifty-500/Nifty-50 companies. As a proportion of the free-float of the Nifty-500, FII ownership remained unchanged QoQ to 43.3%, while DII declined 40bp QoQ to 27.6%. Notably, FII ownership rose 60bpYoY, whereas DII ownership declined 180bp YoY.

The FII-DII ownership ratio in the Nifty-500 increased to 1.6x in 2QFY22. In the last one year, the FII-DII ratio has increased in the Consumer Durables, Metals, Chemicals, Technology, Utilities, Telecom, Retail, Capital Goods, Cement, Insurance, Banks (Private and PSU), and Consumer sectors, but has declined in Real Estate and NBFCs.

Sector holdings: FIIs/DIIs – highest QoQ change in Insurance and PSU Banks; decline in Technology, Utilities, and Chemicals

In the Nifty-500, FIIs have the highest ownership in Private Banks (47.4%), followed by NBFCs (30.1%), Oil &Gas (22.9%), Insurance (22.7%), and Technology (20%), while DIIs have the highest ownership in Private Banks (21.6%), Capital Goods (19.9%), PSU Banks (17.8%), Consumer Durables (17.4%), and Metals (16.9%).

On a QoQ basis, FIIs increased their stake in Consumer Durables (+210bp), Telecom (+150bp), Insurance (+110bp), Metals (+90bp), PSU Banks (+70bp),Capital Goods (+40bp), Oil & Gas (+40bp) and Real Estate (+30bp). In contrast, FIIs reduced their stake in Utilities (- 90bp), NBFCs (-90bp), Autos (-60bp), Chemicals (-50bp), Private Banks (-50bp), Technology (- 40bp), and Healthcare (- 10bp).

On a QoQ basis, DIIs increased their stake in PSU Banks (+130bp), Healthcare (+80bp), Private Banks (+60bp), Insurance (+60bp), Automobiles (+50bp), Retail (+30bp), Consumer (+30bp), Cement (+30bp), and NBFCs (+20bp). On the other hand, DIIs reduced their stake in Technology (-170bp), Consumer Durables (- 110bp), Capital Goods (-70bp), Chemicals (- 60bp), Utilities (-60bp), Oil & Gas (- 50bp), and Telecom (-30bp).

FII allocation in BFSI declines for third consecutive quarter

Financials has had a dominant run over the past few years. However, the BFSI’s underperformance continued to reflect in FII allocation – down to 36.7% in the Nifty-500 as of Sep’21, from 45.2% in Dec’19 and 40% in Mar’20. This resulted in the FII’s weight in BFSI declining by 120bp QoQ. However, FIIs still remained significantly overweight by 650bp in BFSI v/s the Nifty-500 (BFSI’s weight in the Nifty-500 currently stands at 30.2%).Overall, the Top 5 sectoral holdings of FIIs in the Nifty-500 accounted for 73.6% of total allocation – BFSI (36.7%), Technology (13.4%), Oil & Gas (11.1%), Consumer (7.5%), and Healthcare (4.9%).

DIIs overweight in PSU Banks, Metals, and Capital Goods

Overall, the Top 5 sectoral holdings of DIIs in the Nifty-500 accounted for 65% of total allocation – BFSI (28.1%), Technology (10.7%), Oil & Gas (10%), Consumer (9.8%), and Healthcare (6.3%).On a QoQ basis, DIIs increased their weight in 2QFY22 in the following sectors: NBFCs (+40bp), Retail (+30bp), Telecom (+30bp), Consumer (+20bp), Utilities (+20bp), Oil & Gas (+20bp), Insurance (+10bp), Real Estate (+10bp), Private Banks (+10bp), while reducing their weight in Technology, Metals, Automobiles, Capital Goods, and PSU Banks. Thetop 5 stocks by holding value were Reliance Industries (USD29.4b), HDFC Bank (USD22b), ICICI Bank (USD22b), ITC (USD17.1b), and Infosys (USD15.1b).

Nifty-50: FIIs raise holdings in 40% of stocks, DIIs increase stake in 64% of stocks

HDFC Life Insurance, Bharti Airtel, and Eicher Motors were the top stocks that saw an increase of more than 1% QoQ in FII holdings. SBI Life Insurance, UPL, Hero Motocorp, Dr. Reddy's Labs, M&M, and Axis Bank were the top stocks that saw a decline of more than 1% QoQ in FII holding.

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