In a surprising trend reversal, recent data analyzed by the National Stock Exchange reveals a significant shift in ownership among Nifty50 companies. Not only have foreign portfolio investors (FPIs) seen a decline in their stakes, but promoter shares have also decreased for the second consecutive quarter. This decline has brought ownership levels among Nifty50 companies to the lowest point in over two decades, marking a notable change in the market landscape.
Foreign Portfolio Investors (FPIs) and Promoter Share Decline
The ownership landscape of Nifty50 companies has experienced a notable shift, with FPIs witnessing a sharp decline in their ownership shares. FPI ownership in these companies has plummeted to a 12-year low, dropping to 24.3% and hitting a 13-year low in listed companies at 17.4%. This downward trend indicates a significant divestment of large-cap shares by foreign investors, leading to a reshuffling of ownership structures within the market.
Promoters, on the other hand, have also been reducing their stake in companies they own, contributing to a decline in total promoter ownership in NSE-listed and Nifty 500 companies. This decline, amounting to 67 bps and 92 bps quarter-on-quarter, has resulted in promoter ownership levels dropping to 50.4% and 49.6%, respectively. Notably, the most significant reduction in ownership has been observed in Government holding, with a pronounced drop in promoter ownership in the Nifty50 universe to 41.4%, the lowest level in more than two decades.
This decline in ownership shares by both FPIs and promoters has been accompanied by a notable increase in ownership by domestic mutual funds. These funds have seen their share rise to a record 10%, indicating a shift in investment patterns as investors continue to pump money into schemes through monthly instalments. This dynamic restructuring of ownership highlights the evolving landscape of the Indian market and the changing dynamics of investment preferences among different entities.
FPI Selling and Sector Preferences
The decline in FPI ownership can be attributed to significant outflows in the December quarter, totaling $11.9 billion. This marked the first quarterly drop in the last seven quarters, with FPI holdings in NSE-listed companies decreasing by 8.3% qoq to ₹75.8 lakh crore. The study further noted that FPIs have maintained a strong focus on financials, remained positive on communication services, and adopted a more cautious approach towards consumption and commodity-oriented sectors.
Among other sectors, FPIs have retained a neutral stance on consumer discretionary, healthcare, information technology, utilities, and real estate. This strategic positioning reflects the shifting priorities and risk assessments of foreign investors in response to changing market dynamics and economic conditions.
Retail Ownership and Household Wealth
On the retail front, individual investors have seen their ownership inch up by 20 bps QoQ in NSE-listed companies, reaching a 70-quarter high of 9.8%. This increase aligns with record investments of Rs 56,000 crore in the December quarter, signaling a growing interest and participation from retail investors in the market. Their holdings in the Nifty 500 universe and Nifty 50 Index have also shown modest gains, reflecting a preference for mid and small-cap companies and increased investments in these segments.
The strong performance of Indian equities and rising participation levels have contributed to a significant increase in household wealth over the past few years. Estimates suggest that household wealth in Indian equities has surged by over ₹46 lakh crore in the last five years, with a substantial increase of ₹30 lakh crore in the last two years alone. This surge in wealth underscores the growing relevance of the equity market as a wealth creation avenue for households, signaling a broader trend towards increased retail participation and investment in the market.
