Who owns India’s top stocks, and who will 5 years hence?
Excitement about the new govt, bleak outlook for the real estate market and the drop in gold prices in the past two years have helped investors make the shift
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Almost two-thirds of India’s top 200 stocks are owned by its own citizens and corporations, according to data collated by Kotak Institutional Equities. But foreign ownership has been steadily rising, from 24.1% five years ago, to 34.4% currently. The share of foreign investors in floating stock, or stock held by non-promoters, has risen from under 40% five years ago, to over 50%.
Will the trend persist, or does the claw back by retail investors and the jump in mutual fund investments in the past year point to a reversal?
Navneet Munot, chief investment officer at SBI Mutual Fund, says that the increase in allocations to equity mutual funds and stocks in the past year points to a structural shift in investment strategy among domestic investors. While the excitement about the new government has played a large role in improving sentiment for equity investments, the bleak outlook for the real estate market and the drop in gold prices in the past two years have helped investors make the shift as well.
Munot says the central bank’s move to contain Consumer Price Index (CPI)-based inflation and keep real rates positive would boost savings, while reducing the attraction of physical assets, a trend that will augur well for equity investments.
Of course, it goes without saying that global flows will still be a major force to reckon with. However, with equities becoming increasingly popular among domestic investors, and with Employees’ Provident Fund Organisation (EPFO) finally coming on board, some of the trends in the accompanying charts may well be different in the next five years.
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