Domestic mutual funds, retail investors now bigger equity holders than FPIs: MS

The combined holdings of domestic mutual funds and direct households in stocks have risen over 720 bps since 2015 whereas those of foreign portfolio investors (FPI)have declined about 230 bps, Morgan Stanley said in a report.

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The last quarter alone saw a near 90 bps rise in domestic ownership while FPI ownership of sample of 75 companies fell 84 bps QoQ. At 25.6 per cent ownership of India’s largest 75 companies, domestic investors are now larger holders than FPIs for the first time since 2010, the report said.

Average sector positions went higher in the latest quarter led by domestic institutions albeit FPIs continue to run more active portfolios.

FPIs are overweight on financials and lifted the relative position by 40 bps during the quarter after taking it down for five consecutive quarters. The position is still 540 bps below the peak of September 19. The biggest FPI selling happened in technology where they have gone underweight during the quarter, Morgan Stanley said.

“FPIs are also underweight on consumer discretionary and industrials – distinct from our recommendations. While domestic institutions added to technology during the quarter, they remain underweight. They also added financials and consumer discretionary but are overweight on neither. They are overweight on communication services, consumer staples and utilities in divergence from our view.The only sector where we are in sync is industrials where we recently raised our weight,” Morgan Stanley said.

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From among the top 20 aggregate institutional holdings, active positions (relative to the MSCI Index) rose the most for ITC and declined the most for Reliance during the QE June 2022.

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