When it comes to owning stocks of stock market in Indian companies, mutual funds (MFs) and individual investors play a big role compared to foreign portfolio investors (FPIs). In fact, in the last quarter of 2023, domestic mutual funds reached a record high ownership of 8.8% in Indian companies, surpassing FPIs for the first time ever.
During the same period, retail investors held about 7.6% of listed companies, while high-net-worth individuals (HNIs) had a bit over 2% ownership. On the flip side, FPIs, who once dominated the Indian market, have reduced their exposure to a ten-year low, with their ownership dropping to 18.2% by the end of 2023, a decrease of 300 basis points (bps) over the past three years.
As of December 2023, the combined value of shares held by MFs, retail investors, and HNIs stood at Rs 66.02 lakh crore, slightly higher than the Rs 65.11 lakh crore held by FPIs. However, this marks a significant shift from March 2015 when FPIs held a 9.1 percentage points higher share than domestic investors.
During the quarter, mutual funds increased their stakes in 566 companies while reducing exposure in 336 companies. Retail investors also raised stakes in 1,007 companies but lowered their holdings in 869 companies. Interestingly, stocks that retail investors sold off performed better, with a 20% average gain compared to a 14% increase in stocks where they invested more.
Looking at sector-wise trends, both MFs and FPIs showed interest in the utility sector, while selling was observed in fast-moving consumer goods (FMCGs), financial services, and information technology (IT) sectors. Institutional investors, including Life Insurance Corporation of India (LIC), also withdrew funds from the financial services sector during the quarter.
These shifts in ownership dynamics reflect changing investor preferences and market trends. While domestic investors are increasing their presence in the Indian stock market, FPIs are pulling back, impacting sectoral investments and overall market sentiment.
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