InvestorQ : How have domestic investors now become larger than than the FPIs in stock holdings/
Katherine Gonsalves made post

How have domestic investors now become larger than than the FPIs in stock holdings/

rhea Babu answered.
2 weeks ago

According to a note by Morgan Stanley, the aggregate holdings in equities of domestic investors which includes mutual funds, domestic institutions and Indian households, increased by 720 bps in the year 2022. As a result, the domestic ownership level has gone up to 25.6% in the top 75 most liquid companies. This has come at the cost of foreign ownership or FPI ownership. Obviously, this is a trend that is being seen in India for the first time since the year 2010. FPIs saw their holdings fall by 230 bps to 24.8%.

Interestingly, a lot of this ownership shift actually happened in the June 2022 quarter. There was a 90 basis points increase in domestic ownership of Indian equities in the June quarter. In contrast the FPI ownership in this quarter fall by 84 bps in these 75 blue chips. If you look at since December 2011, the FPI ownership in these companies fell 232 bps. That means a big chunk of this shift from FPIs to domestic investors has happened only in the last 2 quarters. This clearly shows signals of a domestication of Indian markets.

One slightly disconcerting signal is the fall in promoter holdings by 20 bps in the last one year. Over the period between 2014 and 2022, this fall has bene as steep as 326 bps. This could be due to a mix of reasons. There have been some promoters have been selling out while there have also been some promoters losing control, possibly due to factors like pledging of equity stakes, financial crunch, pressure on management etc. On the other hand, the holdings of financial institutions are up during the current year.