DII ramp up market exposure as FPI declines, narrowing ownership gap to historic lows

domestic investors’ enthusiasm has driven their overall holding to 16.23 percent, with the cumulative stake of domestic mutual funds reaching an all-time high of 9.52 percent.

It is an open secret that domestic institutional investors (DIIs), including mutual funds, are flush with money and have been aggressively increasing their exposure in the stock markets. It is also well-known that foreign portfolio investors (FPIs) have been scaling back and are mostly on the selling side in the markets.

This has led to a scenario wherein the gap between the ownership of DIIs and FPIs has shrunk to record levels, hitting a historic low in the June quarter.

Data from primeinfobase shows that FPIs' share in NSE-listed companies dropped to a 12-year low of 17.38 percent by the end of June, down from 17.72 percent in March.

On the other hand, domestic investors’ enthusiasm has driven their overall holding to 16.23 percent, with the cumulative stake of domestic mutual funds reaching an all-time high of 9.52 percent.

This shift in Q1FY25 has narrowed the gap between FPI and DII holdings in domestic equities to an unprecedented low, with DII holdings now just 1.15 percentage points. The widest gap was recorded in March 2015, with DIIs trailing FPIs by 10.3 percentage points.

Market experts attribute this trend to the growing influence of DIIs to record inflows into mutual funds' equity schemes. More importantly, they expect DIIs to soon surpass FPIs in shareholding.

In the June quarter, FPIs sold Indian shares worth $1 billion, while domestic institutions, including mutual funds and other financial entities, purchased shares worth Rs 1.25 lakh crore, according to Bloomberg.

Meanwhile, the Nifty 50 index climbed 7.54 percent during the June quarter, following a 2.74 percent rise in March, marking five consecutive quarters of gains.

On a different note, private promoter holdings dropped to a nearly seven-year low of 40.88 percent, driven by stake sales in bullish markets, and increased market institutionalisation.

Retail and high-net-worth individual investor participation saw a slight rise, with their combined share inching up from 9.52 percent to 9.62 percent.

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