Foreign investors' ownership in Indian stocks declines to 12-year low
What's the story
Foreign institutional investors (FII) have witnessed a sharp decline in their stake in NSE-listed companies, falling below 16% for the first time in 12 years. The total assets owned by FIIs in equity declined by 8.8% to ₹71.08 lakh crore in October, the steepest drop since March 2020. Geopolitical tensions in the Middle East, uncertainty at the time over the US presidential elections, slowing earnings growth for the September quarter, and high valuations led to a major sell-off in October.
Market shift
Mutual funds' share in NSE-listed firms hits record high
However, unlike the drop in FII ownership, mutual funds (MFs) witnessed their stake in NSE-listed companies hit a record high of 9.58% in October. The value of shares owned by these funds was pegged at ₹42.36 lakh crore during the period. This change suggests a possible shift in India's capital markets' dynamics, with domestic institutional investors (DIIs) likely overtaking FIIs's stake due to over ₹1 lakh crore inflows last month.
Stake increase
DIIs's stake in Indian shares reaches record high
As of the September quarter, DIIs's stake in Indian shares had hit a record high of 16.2%, up from 16.15% in the last quarter. This was fueled by net inflows of ₹97,408 crore, with ₹67,059 crore going into the secondary market and ₹30,349 crore into the primary market. The exact position for October remains to be seen but could mark a major turning point for India's capital markets if DII exposure has indeed overtaken that of FIIs.
Expert opinion
Market experts weigh in on the shift
Pranav Haldea, Managing Director of PRIME Database Group, said this would mark a major shift in the Indian stock market landscape. He said while FIIs have been the largest non-promoter shareholders and their investment decisions largely dictate market trends, their dominance seems to be fading. Haldea also pointed out that despite heavy FII sell-offs in October, benchmark indices fell just 6%, showing a loss of control over the Indian capital market.