Mumbai: Foreign investors’ ownership in the biggest listed companies rose marginally in the three months ending June, while domestic investors’ holding jumped to a 12-quarter high on the back of continued buying by mutual funds and insurance firms.
For 450 of the 500 firms in the BSE 500 index, which account for at least 90% of India’s market capitalisation, foreign institutional ownership increased to 20.18% by the end of June compared to 20.01% three months earlier.
“Indian markets have become expensive compared to peers," said Dilip Bhat, joint managing director at brokerage Prabhudas Lilladher Ltd. “Corporate earnings have to catch up" for FII (foreign institutional investor) investments to increase.
In the three months ended June, FIIs invested a net $1.8 billion and the BSE 500 rose 4.33%. In the same period, Sensex jumped 4.39% and Nifty gained 3.78%, while MSCI EM was up 5.47% and MSCI World climbed 3.38%.
FII holdings increased mostly in banks and financials and media and entertainment sectors in the June quarter.
The increase in FII holdings was outpaced by domestic institutions which poured more money into equities because of lower returns in other asset classes. The percentage holding of DIIs (domestic institutional investors) in these same set of 450 companies rose to 10.22% by the end of June compared to 9.81% at March-end.
DIIs bought a net Rs20,052 crore worth of stocks during the quarter, the largest in two quarters.
One “reason for such a surge in domestic liquidity is the rise of money flow through mutual fund especially through systematic investment plan (SIP)," said Pankaj Pandey, research head at ICICI Securities.
SIP is an investment plan offered by mutual funds wherein one can invest a fixed amount in a mutual fund scheme at fixed intervals. Mutual fund industry lobby Association of Mutual Funds in India (Amfi) data shows that the industry added about 7.75 lakh SIP accounts each month on an average during the first quarter of FY 2017-18, with an average SIP size of about Rs3,300 per account. The total amount collected through SIP during June 2017 was Rs4,744 crore, according to Amfi.
Banks and financials and FMCG sectors were DII favourites. Banks and financials were most favoured by both DIIs and FIIs after the government implemented the Insolvency and Bankruptcy Code which will aid these companies in managing bad loans. FMCG stocks are expected to gain on goods and services tax booster because of which DIIs increased exposure to the sector in the June quarter, analysts said.