DII holdings in Indian firms set to be highest in 25 quarters

An early review of shareholdings of Indian companies showed that domestic institutional investors’ (DIIs) ownership in 96 of BSE 500 companies in the quarter ended 30 June was the highest in at least 25 quarters, illustrating the increased interest from local investors who have been significant buyers of stocks over the past quarter.

Promoter holdings in these firms declined to the lowest level in 25 quarters, while foreign institutional investors’ (FIIs’) stakes remained little changed.

DIIs’ stake in 96 of the BSE 500 companies that have announced their shareholding pattern showed that their aggregate holdings in these companies stood at 9.36%, the highest since at least the quarter ended June 2009. Holdings of promoters dropped to 55.5%, the lowest in the same period, a Mint analysis showed.

FIIs’ stake in these companies stood at 15.99% at the end of quarter ended June, compared with the 16% level seen at the end of the preceding quarter.

Only those companies for which comparable data was available for 25 quarters were considered.

The study excluded Kotak Mahindra Bank Ltd as there was no comparable data since it merged ING Vysya Bank Ltd with itself in the June quarter. It also excluded Adani Ports and Special Economic Zone Ltd and Adani Power Ltd because of the recent restructuring in the Adani group.

DIIs, mainly mutual funds and insurance companies, bought a net of Rs.32,147.27 crore in Indian shares during the quarter—the highest since BSE started collating the data seven years ago.

“It is simply because of the kind of flows coming in the domestic mutual funds. Over the last several quarters, the trend of flows has been quite consistent, and that is showing up in the increase in DIIs’ holdings,” said Harsha Upadhyaya, chief investment officer, equity at Kotak Mutual Fund. “One can safely say there are no signs of reversal of this trend of inflows into mutual fund as yet.”

The mutual fund industry’s average assets under management (AUM) crossed the Rs.12 trillion mark for the quarter ended 30 June, a record high, Crisil Research said in a note on 3 July.

The industry grew for the seventh consecutive quarter, an increase of 3.3%, or Rs.39,551 crore, to Rs.12.28 trillion (excluding fund of funds) in the latest quarter, according to data released by the Association of Mutual Funds in India (Amfi).

Crisil Research pointed out that investors continued to pump money into equities despite the recent volatility and the category’s average AUM rose 4.9% or by Rs.18,711 crore to a record high of Rs.4 trillion, led by robust inflows of Rs.22,068 crore in the first two months of the quarter

On the other hand, FIIs pumped in a mere $184.34 million in Indian shares in the June quarter, the lowest since the quarter ended September 2013.

Of the 96 BSE 500 companies, DIIs raised stakes in 59 companies, while trimming their stakes in 27 of them. Their aggregate holdings were the same as the preceding quarter for the remaining 10 companies.

State-run Life Insurance Corp. of India (LIC), the biggest domestic investor and the country’s largest life insurer, has been actively buying Indian shares in the last two quarters, Mint reported on 3 July.

Meanwhile, the drop in promoters’ holding could be attributed to QIPs (qualified institutional placements ), and promoters cashing in on the market gains.

“It could be some dilution of capital and QIPs. There were quite a few capital raising exercises,” said Navneet Munot, chief investment officer at SBI Mutual Fund, referring to the decline in promoters’ stake.

“Mutual funds have seen strong inflows. For next several years, I see this trend of rising stakes of mutual funds in Indian companies continuing,” Munot added.

Infrastructure firm Hindustan Construction Co. Ltd, which had raised Rs.400 crore through QIP in April, saw DIIs stakee in the stock rise the most—by 10.78 percentage points from the end of the March quarter to 14.24% at the end of the June quarter—while promoters’ stake in it dropped the most, 7.44 percentage points, to 36.07%.

State-run lender Canara Bank followed next, with DIIs holdings in it rising by 7.48 percentage points from the end of the preceding quarter to 20.03%.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.