Domestic investors, both individual and institutional, have surpassed the 25% mark in ownership of companies listed on the National Stock Exchange (NSE) for the first time, according to data from Prime Database. The share of domestic investors rose to 25.72% at the end of the March 2023 quarter, up from 24.44% in the previous quarter, while foreign portfolio investors (FPIs) saw a slight increase in their shareholding to 20.56% from 20.24% as of December 31, 2022.
Since 2015, domestic investors’ grip on the market has been tightening, while that of overseas funds has been waning. In March 2015, FPI shareholding in NSE-listed companies was 23.3%, while the combined holding of domestic institutional investors (DIIs), retail, and high net worth individuals (HNIs) was only 18.47%.
Experts suggest that the rising share of domestic investors makes the Indian market less susceptible to foreign influence. This was evident last year when a record $33 billion FPI outflow failed to have a significant impact on domestic equities, allowing the market to outperform most of its global peers in 2022.
According to Prime Database, “This was the sixth consecutive quarter where the combined share of domestic investors has increased. It showcases the steadfast march of the Indian capital market towards Atmanirbharta (self-reliance).” DIIs’ shareholding at the end of the March 2023 quarter stood at 16.35%, up from 15.32% in the previous quarter, thanks to net inflows from domestic mutual funds (MFs) of Rs. 54,942 crore during the quarter.
Retail holding increased to 7.48% from 7.23%, while HNI holding fell marginally to 1.88% from 1.89%. Prime Database noted that “The gap between FPI and DII holding has decreased to its lowest level ever. DII holding is now just 20.46% lower than FPI holding. On December 31, 2022, DII holding was 24.3% lower than that of FPIs. The widest gap between the two was at the end of March 31, 2015, at 55.45%. The FPI to DII ownership ratio has also declined to an all-time low of 1.26.”
A closer look at DII ownership shows the dominance of MFs, with their share rising for the seventh consecutive quarter to an all-time high of 8.74% during the March quarter. Meanwhile, the share of insurance companies increased to a six-year high of 5.87%, with state-owned Life Insurance Corporation (LIC) accounting for two-thirds of insurance companies’ investments in domestic equities.
Interestingly, the promoter shareholding in privately held companies decreased to a three-year low of 41.97% as of March 31, 2023, from 43.25% as of December 31, 2022. Over the past 13 years, the share of promoters in private firms has been steadily increasing from 33.6% on June 30, 2009.
On the other hand, the share of the government (as a promoter) in listed companies has been steadily declining from 22.48% in June 2009 to 7.75% at the end of the March 2023 quarter, due to the disinvestment of stakes in listed public sector undertakings (PSUs) and the declining share of PSUs in the overall market cap.
