Over the past few years, ownership pattern of Indian equities has witnessed rapid changes, says a report by Motilal Oswal Securities.
ET Wealth throws light on key trends in foreign and domestic institutional ownership of Indian equities.
Who are FIIs and DIIs?
Foreign institutional investors (FII) or foreign portfolio investors (FPI) refers to investors from other countries putting money in Indian stock markets. These are in the form of sovereign wealth funds, investment trusts, mutual funds, pension funds apart from banks. Domestic institutional investors (DII) comprise local mutual funds, insurance companies, local pension funds, and banking and financial institutions.
Why are they important?
Stock markets are primarily driven by institutional money. FIIs and DIIs account for the bulk of the liquidity in the market. Tracking their inflows and outflows can help predict the broader trends in the market. Historicaly, FIIs have had a greater influence on the domestic markets. However, recent exodus of FIIs has partially been offset by the sustained flow from DIIs.
FII ownership in Indian stocks is at five year low
DII ownership of Indian equities is rising at a fast clip with consistent and rising SIP investments along with shift toward financial savings.
FII-DII ownership ratio has declined sharply
FII-DII ownership ratio has declined to 1.4x from 2.2x in the last five years.
Decline in FII ownership appears broad-based
FIIs have reduced ownership in 90% of Nifty50 companies compared to December 2019 quarter even as DIIs increased stake in 78% of Nifty50 companies. Similarly, FII ownership in 67% of Nifty500 companies has declined while DIIs have seen ownership rise in 61% of the Nifty500 basket.
Broader sector allocation by FIIs and DIIs is similar
FIIs still remain significantly overweight in BFSI (39.8%) relative to Nifty500 (31.7%). DIIs are overweight in utilities, capital goods, metals and PSU banks and underweight in BFSI and technology.
Both have cut back sharply in BFSI and auto
DIIs have favoured telecom while paring back exposure to capital goods firms.
Stocks that saw biggest changes in ownership
Zee witnessed substantial rise in FII holding over past year, even as they pared exposure in most of the Nifty50 basket. DII stake in Cipla, Eicher Motors and UltraTech Cement has grown sharply over this period.
Countries FII inflows are coming from
Data for Jan-Mar quarter 2020 Source: Bloomberg
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