Despite decline, FPIs ownership in NSE-listed stocks still stands at 36.3%

The Foreign Portfolio Investors (FPIs) ownership in companies listed on the National Stock Exchange (NSE) has been steadily declining over the past three years but still they are the major shareholder.

According to an NSE report, by the end of the previous quarter, FPIs holding stood at 36.3 per cent in the NSE-listed floating stocks, despite the seventh consecutive quarterly decline.

From a high of 39.9 per cent in Dec 2021, FPIs holding stands at 36.3 per cent as on September 30 the lowest level of the last three years. It is to be noted that despite FPIs reducing their ownership over the past three years the Indian indices continued with the upward movement and touched new highs.

NSE data also suggests that FPIs ownership in floating stock now is 9.6 percentage points below the peak level recorded in March 2014. Notably, the report points out that the decline in FPI ownership began well before the October 2024 market sell-off, indicating a sustained trend.

It said "On the other hand, FPI holding in the floating stock of the NSE listed universe dipped for the seventh consecutive quarter, standing at 15.5-year low of 36.3 per cent. FPI share in the NSE floating stock is now 9.6pp below the peak share seen eight years back (March 2014)".

In contrast, the report data highlighted that the active Domestic Mutual Funds (DMFs) have been increasing their investments in the NSE-listed companies. Their ownership in these companies has risen from 12.4 per cent in December 2021 to 15.7 per cent currently.

On decline in FPI ownership the report said "This dip, however, was much stronger in large and mid-cap companies, as evidenced from a 36bps QoQ increase in FPI share in the free float stock of the NSE listed universe excluding the Nifty 500 companies to 12.8 per cent".

For the floating stock, DMFs now hold 19.4 per cent, a record high and a rise of 39 basis points quarter-on-quarter. This marks a full percentage-point increase in the first half of 2024.

Banks and insurance companies have also expanded their market share. Their ownership in NSE-listed companies has grown from 8.8 per cent three years ago to 11 per cent now, reflecting increased domestic institutional participation.

The report data highlighted a notable shift in the Indian equity markets, where domestic institutions, particularly mutual funds, banks, and insurers, are gaining prominence as FPIs reduce their exposure. This trend could signal a deeper engagement of local investors in shaping the market dynamics.