Record Highs for Mutual Funds and Retail Investors in NSE Stocks, FIIs at 12-Year Low

Domestic mutual funds (MFs) have substantially increased their holdings in companies listed on the National Stock Exchange (NSE), reaching an unprecedented high. As of June 30, 2024, mutual funds held a record 9.17% of NSE-listed companies, up from 8.93% in March 2024. This growth is driven by robust net inflows of over Rs 1 lakh crore into mutual funds during the quarter, according to data from Prime Database.

LIC’s Equity Holdings Hit Historic Low

The Life Insurance Corp. of India (LIC), India’s largest institutional investor, saw a reduction in its shareholdings. LIC’s stake across 282 companies, where it holds more than 1%, dropped to an all-time low of 3.64% as of June 30, 2024, from 3.75% in March 2024. Despite LIC’s net buying of Rs 12,400 crore during the quarter, this decline occurred. Pranav Haldea, Managing Director of PRIME Database Group, highlighted that LIC’s dominant position in equity investments by insurance companies (holding at least 70% or Rs 15.72 lakh crore) also led to a drop in the overall share of insurance companies from 5.40% to 5.23%.

Domestic Investors on the Rise

The total share of all domestic institutional investors (DIIs) increased to 16.23% from 16.07% in March 2024. On the other hand, foreign institutional investors (FIIs) have been pulling out funds from the Indian market, resulting in a 12-year low share of 17.38%. This shift has brought the gap between domestic and foreign holdings to its narrowest ever, with DIIs holding just 6.60% less than FIIs.

Historically, the widest gap between FII and DII holdings was in March 2015, when DIIs held 49.82% less than FIIs. The FII to DII ownership ratio has now dropped to an all-time low of 1.07 as of June 30, 2024, down from a high of 1.99 in March 2015.

Retail Investors and HNIs: Growing Market Influence

Retail investors and high net worth individuals (HNIs) have increased their presence in the market. Their combined share reached an all-time high of 25.85%. The share of retail investors climbed to 7.64% as of June 30, 2024, up from 7.52% in March 2024. Meanwhile, the share of HNIs slightly decreased to 1.98% from 2% during the same period. Consequently, the combined share of retail and HNI investors rose to 9.62% from 9.52%.

Shifts in Sectoral Allocations

DIIs have increased their investments in the Commodities sector, raising their allocation from 7.91% in March 2024 to 8.73% in June 2024. Conversely, they reduced their allocation to the Energy sector from 11.53% to 10.64%. In contrast, FIIs boosted their investments in the Consumer Discretionary sector from 16.23% to 17.13%, while decreasing their allocation to the IT sector from 8.93% to 8.09%.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.