Shift in Ownership Dynamics: Domestic Investors Gain Ground as FPI Holdings Decline

Foreign Portfolio Investors' (FPI) stakes in NSE-listed companies fell for seven consecutive quarters, dropping to a three-year low. Despite diminishing from a peak in 2021, the Indian market rallied to record highs. Meanwhile, domestic mutual funds, banks, and insurers have increased their influence significantly.

The once-dominant Foreign Portfolio Investors (FPIs) in National Stock Exchange (NSE)-listed companies have seen their ownership decline continuously over the past three years, yet they remain the primary shareholders. According to a recent NSE report, as of the last quarter's end, FPI holdings were at 36.3% of floating stocks, marking the seventh straight quarterly drop.

From a peak of 39.9% in December 2021, FPIs' stakes fell to 36.3% by September 30, reaching a three-year low. This decline, however, hasn't hindered the Indian indices' growth, which have surged to new heights despite reduced FPI participation. The NSE data also reveals that FPI holdings in floating stock are now 9.6 percentage points lower than the March 2014 peak. The downturn began well before the market plunge of October 2024, indicating a long-term trend.

While FPI holdings dwindle, domestic mutual funds (DMFs) have been on a steady incline. From December 2021's 12.4%, their stake has climbed to 15.7%. Additionally, banks and insurers have boosted their positions from 8.8% three years ago to 11%. This shift signifies a growing influence of domestic institutions in the equity markets, reshaping market dynamics as FPIs lower their holdings.

(With inputs from agencies.)