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Rising trend continues in DII ownership

Market movers within the BSE500 universe have undergone a significant transformation in the past decade. The once dominant foreign institutional investors (FII) are no longer the sole drivers of the market. This shift is in tandem with the rise in domestic institutional investors (DII) whose ownership in the BSE500 universe is at an all-time high.

DII today an equally dominant force

Historically, FII played a pivotal role in India’s markets, especially during CY09-14, benefitting from quantitative easing (QE) measures in Developed Economies (DE). However, with the gradual tapering off of these measures, there has been a noticeable shift. Since CY15, DII have emerged as a strong force, consistently overshadowing FII inflows. This shift underscores a broader transition from savings in physical assets to financial ones, reflecting deeper domestic market penetration and an evolving investment culture, driven by systemic investment plans (SIP).

Promoter ownership went up in H2FY24; Real estate leads

Promoter ownership rebounded recently after initially declining up to CY19, primarily influenced by decreasing government stakes. Real estate still has the highest promoter ownership while the rally in public sector banks (PSB) has pushed up ownership of the government within the BSE500 universe.

Different trends in DII and FII activity

Overall institutional ownership has declined from its peak on the back of sustained selling from FII as well as influenced by sector-specific underperformance amid a cautious investment stance. Despite nominal capital inflows recently, FII have displayed a conservative approach, particularly toward sectors, such as the BFSI, where there has been significant retraction. Conversely, there is a slight increase in allocation toward commodity-oriented sectors albeit maintaining an Underweight position. In contrast, DII have witnessed a slight uptick in their holdings, which is at record highs. This rise is supported by robust mutual fund investments and a strategic Overweight on India’s consumption story.

Retail ownership at lows

Contrary to popular perception, data shows that direct retail investor ownership in stocks is close to all-time lows, close to 12%. This is despite the record number of DMat account additions over the last few quarters. This suggests that the small investors are parking major parts of their money in domestic institutions   and investing only a smaller part of   their corpus directly in equity markets.

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