The dominance of domestic investors in the shareholding pattern of listed companies has touched another all time high in the December quarter of 2022, according to a study conducted by Primeinfobase.
The share of
retail investors
, Domestic Institutional Investors (DIIs) and High Net-worth Individual (
HNI
) reached an all- time high of 24.44 per cent as on December 31, 2022 from 24.25 per cent.
"This was the fifth consecutive quarter where the holding has increased, having come up from 22.37 per cent as on September 30, 2021 and showcases the rising dominance of domestic investors. Net inflows from DIIs stood at Rs 27,134 crore during the quarter," said Pranav Haldea, Managing Director, PRIME Database Group.
Meanwhile, net inflows from Foreign Institutional Investors (FIIs) of Rs 47,349 crore during the quarter resulted in
FII
share increasing to 20.18 per cent as on December 31, 2022, up by 20 bps from 19.98 per cent as on September 30, 2022.
According to Haldea, a structural shift in relation to foreign and domestic investors has taken place in the Indian market. To put this in perspective, as on March 31, 2015, FII share was 23.30 per cent while the combined share of DII, retail and HNI was just 18.47 per cent.
This implies that the gap between FII and DII holding decreased to its lowest level in this quarter, with DII holding now being just 24.09 per cent lower than FII holding (On September 30, 2022, DII holding was 24.87 per cent lower than FII holding).
The widest gap between FII and DII holding was in quarter ending March 31, 2015, when DII holding was 55.45 per cent lower than FII holding.
The FII to DII ownership ratio also declined to an all time low of 1.32 as on December 31, 2022 down marginally from 1.33 as on September 30, 2022. Over a 13-year period (since June 2009), FII share has increased from 16.02 per cent to 20.18 per cent while DII share has increased from 11.38 per cent to 15.32 per cent.
However, FIIs remain the largest non-promoter shareholders in the Indian market and their investment decisions have a huge bearing on the stock prices and overall direction of the market.
Share of domestic Mutual Funds (MFs) in companies listed on NSE rose for the sixth quarter running and reached an all time high of 8.09 per cent as on December 31, 2022, up from 7.97 per cent as on September 30, 2022. This was after 5 quarters of consecutive decline from March 31, 2020 (7.96 per cent) to June 30, 2021 (7.25 per cent). The share has increased on the back of net inflows by domestic mutual funds of Rs 22,698 crore during the quarter.
Mutual funds increased their exposure to Financial Services and Industrials sectors while trimming down their exposure to Utilities and Diversified.
Share of Insurance companies as a whole also increased to a 5-year high of 5.65 per cent as on December 31, 2022 up from 5.57 per cent as on September 30, 2022. LIC’s share (across 268 companies where its holding is more than 1 per cent), increased to 3.95 per cent as on December 31, 2022 from 3.87 per cent as on September 30, 2022.
Insurance companies increased their exposure to Energy and FMCG sectors while trimming down their exposure also to Consumer Discretionary and Diversified.
Share of DIIs as a whole thus increased to an all time high of 15.32 per cent as on December 31, 2022 from 15.01 per cent as on September 30, 2022.
Share of retail investors (individuals with up to INR 2 lakh shareholding in a company) in companies listed on NSE declined marginally to 7.23 per cent as on December 31, 2022, from 7.34 as on September 30, 2022. In INR value terms, retail holding increased to INR 19.94 lakh crore from INR 19.48 lakh crore on September 30, 2022, an increase of 2.35 per cent.
Share of High Net Worth Individuals (HNIs) (individuals with more than INR 2 lakh shareholding in a company) in companies listed on NSE also declined to 1.89 per cent as on December 31, 2022 from 1.90 percent on September 30, 2022. As such, the combined retail and HNI share stood at 9.12 per cent as on December 31, 2022, down from 9.24 per cent as on September 30, 2022.
The collective share of retail, HNI and domestic Mutual Funds put together remained same at 17.21 per cent as on December 31, 2022 when compared to as on September 30, 2022.
Holding of FIIs (in INR value terms) in companies listed on NSE stood at INR 55.70 lakh crore as on December 31, 2022, an increase of 4.98 per cent from INR 53.06 lakh crore as on September 30, 2022. FIIs pulled out INR 3,162 crore from Consumer Durables and Oil, Gas & Consumable Fuels sector during the quarter while investing INR 19,391 crore in Financial Services & FMCG.
There were 11 companies in which the trinity of promoters, FIIs and DIIs all increased their stake during the quarter these being (in descending order by market capitalisation) Natco Pharma, Vardhman Textiles, Granules India, Garware Technical Fibres, Hikal, Kaveri Seed Co., Power Mech Projects, Marksans Pharma, Bajaj Healthcare, Pitti Engineering and S.P.Apparels.
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Now, delving into the article on the dominance of domestic investors in the shareholding pattern of listed companies in the December quarter of 2022, let's break down the key concepts:
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Shareholding Pattern Dynamics: The shareholding pattern of listed companies in the December quarter of 2022 indicates a significant rise in the dominance of domestic investors. The combined share of retail investors, Domestic Institutional Investors (DIIs), and High Net-worth Individuals (HNIs) reached an all-time high of 24.44%, showcasing a consistent increase over the past five quarters.
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Net Inflows and DIIs: Net inflows from DIIs during the quarter amounted to Rs 27,134 crore, contributing to the overall increase in the share of domestic investors. This reflects a structural shift in the Indian market, with DIIs playing an increasingly influential role.
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Foreign Institutional Investors (FIIs): On the other hand, net inflows from Foreign Institutional Investors (FIIs) stood at Rs 47,349 crore, resulting in an increase in FII share to 20.18%. The article notes a historic shift, emphasizing that the gap between FII and DII holdings is now at its lowest level.
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Ownership Ratios and Trends: The FII to DII ownership ratio has declined to an all-time low of 1.32, indicating a narrowing gap between foreign and domestic investor ownership. Over a 13-year period, FII share has increased from 16.02% to 20.18%, while DII share has increased from 11.38% to 15.32%.
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Mutual Funds and Insurance Companies: The share of domestic Mutual Funds (MFs) in listed companies rose to an all-time high of 8.09%, with net inflows of Rs 22,698 crore during the quarter. Insurance companies also saw an increase, reaching a 5-year high of 5.65%.
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Sector-wise Exposure Changes: Both mutual funds and insurance companies adjusted their exposure to different sectors. Mutual funds increased their exposure to Financial Services and Industrials while decreasing exposure to Utilities and Diversified. Insurance companies increased exposure to Energy and FMCG while reducing exposure to Consumer Discretionary and Diversified.
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Specific Company Stake Changes: The article highlights 11 companies where the trinity of promoters, FIIs, and DIIs increased their stake during the quarter. Notable companies include Natco Pharma, Vardhman Textiles, Granules India, and others.
In conclusion, the shareholding landscape in the Indian market is experiencing a notable shift, marked by the increasing influence of domestic investors, changing ownership ratios, and adjustments in sector-wise exposures by institutional players. These trends are indicative of the evolving dynamics within the Indian financial ecosystem.
