Stock Markets: Mutual Funds, Individual Investors Have Bigger Stake Than Foreign Portfolio Investors

As compared to foreign portfolio investors (FPIs), mutual funds (MFs) and individual investors have a larger stake in the stock market. 

With the holdings of domestic mutual funds in Indian companies touching a record high of 8.8% in the October-December quarter of 2023, the combined ownership of MFs, retail and high-net-worth individuals (HNIs) has surged more than that of FPIs for the first time.

Although the retail investors held another 7.6% of companies listed on the bourses, the ownership of HNIs tipped at a bit over 2% during the quarter. 

Conversely, overseas investors, who used to be the driving force of the Indian market not so long ago, have cut down their exposure to a decadal low. By the end of 2023, the ownership of FPIs was recorded at 18.2%, which is a dip of 300 basis points (bps) over the past three years.

As of December-end 2023, shares held by the MFs, retail and HNIs are valued at Rs 66.02 lakh crore. Comparatively, the holdings of FPIs are valued at Rs 65.11 lakh crore. However, the gap between the two groups was up to 9.1 percentage points (ppts) in March 2015. From that time onwards, the FPIs have been reducing their exposure in the Indian market.

During the quarter, mutual funds raised stakes in 566 companies while they reduced exposure in 336 companies. At the same time, the retail investors upped stakes in 1,007 companies against lowering in 869 companies. However, companies in which retail investors cut their exposure rallied 20% on average during the quarter, against 14% gains recorded by stocks, where they made additional buys.

On a sequential basis, the utility sector attracted the biggest buying from both overseas investors and MFs. However, selling was witnessed in fast-moving consumer goods (FMCGs), financial services and information technology (IT) sectors. 

Similarly, all institutional investors, including Life Insurance Corporation of India (LIC), have pulled out money from the financial services sector during the stated quarter.

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