FII holdings rise in mid-cap stocks despite broader market sell-off

FII holding in the Nifty SmallCap 250 index fell to a four-quarter low of 14.2 percent during the quarter

• FII holdings in Nifty MidCap 150 rose for third straight quarter to 16.4 percent
• FII ownership in large-cap and small-cap indices fell in the December quarter
• DII holdings increased across all segments, hitting multi-quarter highs

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Foreign investors have been trimming holdings across Indian markets, but data shows a steady rise in their ownership of mid-cap firms.

According to data from Elara Capital, foreign institutional investor (FII) holding in the Nifty MidCap 150 index rose to a multi month high of 16.4 percent during the December quarter. This marked the third consecutive quarterly increase, up from 16.1 percent in the September quarter and 15.7 percent a year ago. The data is available only up to December 2022.

In contrast, FII holding in Nifty 50 companies declined to a three-quarter low of 25.5 percent during the December quarter, compared with 25.6 percent in the previous quarter and 25.2 percent a year earlier.

The small-cap segment also witnessed a decline in foreign ownership. FII holding in the Nifty SmallCap 250 index fell to a four-quarter low of 14.2 percent during the quarter, down from 14.3 percent in the September quarter and 14.1 percent in the same period last year.

Experts said the fall in FII stake in large-cap stocks reflects global risk aversion. However, mid-cap participation has risen to multi-year highs, indicating selective rotation within the market.

Sector-wise data showed year-on-year increases in FII holdings in telecom, up 23.8 percent, media at 14.3 percent, materials at 11.2 percent, metals at 9.6 percent and financials at 9.5 percent. At the same time, FIIs reduced exposure to utilities and consumer staples, both down 8.5 percent, consumer discretionary down 7.9 percent, banks down 7.0 percent and real estate down 6.7 percent.

At the broader market level, FII holding in the Nifty 500 index remained unchanged on a quarter-on-quarter basis at 20.1 percent, while on a year-on-year basis it edged up marginally from 19.9 percent.

Meanwhile, domestic institutional investor (DII) holdings increased across market segments during the quarter. In the Nifty 50 index, DII ownership rose to a seven-quarter high of 16.8 percent, compared with 16 percent in the previous quarter and 15.8 percent a year ago.

DII holdings in the Nifty MidCap 150 index touched a four-quarter high, while holdings in the Nifty SmallCap 250 index climbed to record levels at 17.3 percent and 14.6 percent, respectively. Meanwhile, DII ownership in the Nifty 500 index rose to a six-quarter high of 14.6 percent during the quarter.

Experts added that the rise in DII ownership indicates increasing domestic institutional dominance in market ownership, contributing to improved market stability and depth, even as promoter holdings have seen gradual dilution. Accumulation trends in mid-cap and small-cap stocks, they said, remain steadier but less pronounced.