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Ownership analysis – DII stake in Nifty-500 at 12-quarter low

FIIs/DIIs increase holding in Insurance and PSU Banks

* 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. On a QoQ basis, FIIs increased their holding in Consumer Durables, Capital Goods, Oil & Gas, and Telecom, while DIIs reduced their holding in these sectors. On the other hand, DIIs increased their positioning in Automobiles, Private Banks, and Healthcare, whereas FIIs cut their stake in these sectors on a QoQ basis.

* FIIs and DIIs posted inflows of USD0.4b and USD4.2b, respectively in 2QFY22.

* In this report, we dive deep into their ownership of the various sectors/companies in the Nifty-500 to see how this changed in 2QFY22.

FII holding in Nifty-500 remains unchanged QoQ

* FII 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.

* A mixed trend was observed in promoter holdings – with a marginal increase of 10bp QoQ (down 10bp YoY to 50.2%). Promoter stake in AAVAS Financiers, Max Healthcare, Bank of India, HUDCO, NMDC, Hindustan Copper, Mastek, Canara Bank, Coforge, and HDFC AMC declined on account of stake sale and capital raising exercises. Conversely, Just Dial, Thyrocare Technologies, LIC Housing Finance, Adani Green, and CESC saw a QoQ increase in promoter stake.

* 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 (from 1.5x in the previous quarter).

* 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, (i) 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 (ii) 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 (Private Banks, NBFCs, Insurance, and PSU Banks) underperformance has 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 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%).

* BFSI was followed by Technology in which FIIs had 13.4% weight (up 30bp QoQ/10bp YoY), Oil & Gas (11.1%) and Consumer (7.5%). 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%).

* FIIs were significantly overweight (v/s Nifty-500) in Private Banks/NBFCs and underweight in Consumer, Capital Goods, Metals, Healthcare, and PSU Banks.

* On a QoQ basis, FIIs increased their weight in Oil & Gas, Telecom, Technology, Real Estate, Retail, Consumer Durables, Media, and Utilities, while reducing their holding in Private Banks, Healthcare, Automobiles, PSU Banks, Infrastructure, Consumer, and Metals.

* In terms of absolute holdings, out of the total FII holdings of USD706b, Private Banks topped with USD150b in investment value. The Top 5 companies that contributed 34% to the holding value were Reliance Industries (USD62.4b), HDFC Bank (USD59.2b), HDFC (USD48.4b), ICICI Bank (USD38.5b), and Infosys (USD32.6b).

DIIs overweight in PSU Banks, Metals, and Capital Goods

* Using the Nifty-500 as a benchmark, DIIs were significantly overweight in PSU Banks, Metals, Capital Goods, Automobiles, and Consumer, while being underweight in Technology, NBFCs, and Private Banks.

* Overall, the Top 5 sectoral holdings of DIIs in the Nifty-500 accounted for 65% of the total allocation – BFSI (28.1%), Technology (10.7%), Oil & Gas (10%), Consumer (9.8%), and Healthcare (6.3%).

* In 2QFY22, DIIs increased their weight in the following sectors on a QoQ basis: NBFCs (+40bp), Retail (+30bp), Telecom (+30bp), Consumer (+20bp), Utilities (+20bp), Oil & Gas (+20bp), Insurance (+10bp), Real Estate (+10bp), and Private Banks (+10bp), while reducing their weight QoQ in Technology, Metals, Automobiles, Capital Goods, and PSU Banks.

* Out of the total DII holdings of USD450b in the Nifty-500, Private Banks topped at USD68b, followed by Technology at USD48b and Oil & Gas at USD45b.

* The top 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 increase holding in 40% of stocks, DIIs in 64% of stocks

* On a QoQ basis, FIIs raised their stake in 40% of the Nifty-50 companies and DIIs in 64% of Nifty-50 companies.

* 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 holdings.

* DII holdings in Nifty stocks increased the most in Dr. Reddy's Labs, Cipla, SBI Life Insurance, Tata Motors, UPL, Hero Motocorp, ITC, IndusInd Bank, HCL Technologies, and Axis Bank – up by more than 1% QoQ. IOCL, Infosys, Power Grid Corp, Wipro, Bharti Airtel, and Tata Steel saw a decline of more than 1% QoQ in DII holdings.

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