The major setback for FIIs was the introduction of an additional surcharge on FPIs in the budget
In the three months ended September, FIIs sold Indian shares worth $3.17 billion
Mumbai: The ownership of foreign investors in the biggest listed companies in India has risen with data showing that foreign institutional ownership has increased to an eight-quarter high of 20.93% by the end of September for 414 firms in the BSE 500 index, which comprise at least 90% of India’s market capitalization.
This is higher than the 20.81% stake held by foreign institutional investors (FIIs) in these companies in the June quarter and the 20.50% in the September quarter last year, according to data provided by Capitaline.
FII ownership holdings have increased despite massive sell-off of domestic equities by these investors in the three-month period. Overall stock markets were down in the September quarter, which perhaps explains why FII holdings grew despite an outflow in Indian equities, according to Himanshu Srivastava, senior analyst and manager research, Morningstar Investment Adviser India.
In the three months ended September, FIIs sold Indian shares worth $3.17 billion, while the benchmark indices Sensex and Nifty were down 2-3% in the same period.
“Uncertainty, hope, and despair, the three moods of investors, were effectively captured by the Indian equity markets through the quarter ended September 2019. The premise for the markets at the start of the quarter was not encouraging. In fact, the signs of stress were visible towards the end of the previous quarter (ended June 2019), with initial euphoria around the election results subsiding and focus shifting to fundamental drivers. By the end of June, markets started to lose steam on the back of growing concerns over domestic macro conditions and the pressing global environment," said Srivastava.
The major setback for FIIs was the introduction of an additional surcharge on foreign portfolio investors in the budget, which triggered a massive sell-off in Indian equities. However, the government rolled back the surcharge in the latter part of September and announced a slew of stimulus measures, including the reduction of corporate taxes.
Subpar monsoon in key areas, a weak earning season, slowing domestic growth and weakness in the rupee added to FII’s concern in July-September, Srivastava said. In the same period, the rupee depreciated 2.60% against the dollar. FII holdings increased mostly in banks and financials, and media and entertainment sectors in the September quarter.
Meanwhile, domestic institutions continued to pump money into Indian shares. Data showed that holdings of domestic mutual funds and insurance companies in the 414 companies of the BSE 500 surged to their highest level in at least 25 quarters.
At the end of September, domestic institutions held a 13.25% stake in the BSE 500 index. That was an increase from 12.64% at the end of June and 11.99% a year ago. In the September quarter, net domestic institutional investments in local stocks was a record ₹53,818.92 crore.
Retail participation was also high in September. In that month alone, the total amount collected through systematic investment plans (SIPs), which allow people to invest a fixed amount in a mutual fund scheme periodically at fixed intervals, stood at ₹8,262.94 crore.