The Indian stock market witnessed significant shifts in ownership during the July-September quarter of 2024, marked by strong participation from domestic mutual funds (MFs) and institutional investors. As of September 30, 2024, the share of domestic mutual funds in companies listed on the National Stock Exchange (NSE) reached an all-time high of 9.45%, up from 9.18% on June 30, 2024. This growth was driven by net inflows of US$ 10.57 billion (Rs. 89,038 crore) during the quarter, signaling strong investor confidence in Indian equities.

Record Inflows Push Domestic Institutional Investors’ (DIIs) Share to New Heights

The Domestic Institutional Investors (DIIs) saw their share rise to a record high of 16.46%, supported by net inflows of US$ 12.30 billion (Rs. 1,03,625 crore). This marks a significant increase in the role of DIIs in the Indian equity market, narrowing the gap with Foreign Institutional Investors (FIIs), who experienced a marginal increase in their market share, reaching 17.55%. The share of DIIs now stands at just 1.09% lower than that of FIIs, the smallest gap recorded so far. Mr. Pranav Haldea, Managing Director of PRIME Database Group, emphasized that the FII to DII ownership ratio had fallen to an all-time low of 1.07%, reflecting a shift towards greater local institutional participation in the market.

LIC's Reduced Stake and Impact on Insurance Companies' Market Share

In contrast to the rise in DII inflows, Life Insurance Corporation of India (LIC), the country's largest institutional investor, saw its share fall to a record low of 3.59% as of September 30, 2024, from 3.64% in the previous quarter. This decrease is attributed to profit booking by LIC, which increased its stake in 78 companies while reducing its stake in 103 companies. As a result, the overall share of insurance companies in the market slightly dropped to 5.21%, down from 5.24% previously.

Shift in Investor Allocations: Consumer Discretionary, Healthcare, and Financial Services

During the quarter, both DIIs and FIIs made notable shifts in their allocations. DIIs increased their stake in the Consumer Discretionary sector while reducing their holdings in Financial Services. On the other hand, FIIs raised their investments in the Healthcare sector while cutting their exposure to Financial Services. These changes reflect the evolving market sentiment and sectoral preferences in response to both global and domestic economic factors.

Retail and HNI Investors See Increased Share

The combined share of retail and High Net-Worth Individual (HNI) investors in Indian equities stood at 9.58% by the end of Q3 2024. The growing involvement of retail and HNI investors in the market further highlights the diversification of the investor base, as more individual investors participate in the equity markets, buoyed by favorable market conditions and increased access to investment opportunities.

Private Promoters See Increase in Ownership

The share of private promoters in Indian companies increased to 41.34%, while the government's share as a promoter decreased to 9.71% from 10.64%. This shift reflects a broader trend in Indian markets, where private sector ownership has been gradually increasing, potentially indicating a move towards more market-driven and private-sector-led growth.

Conclusion: A Growing Role for Domestic Investors

The Indian equity market continues to witness significant participation from domestic mutual funds (MFs) and institutional investors. With DIIs reaching record inflows and narrowing the gap with FIIs, the dominance of domestic investors in the market is becoming increasingly evident. The growth in mutual fund inflows, coupled with the increased participation of retail and HNI investors, underscores a shifting dynamic in the market, where domestic players are playing a pivotal role in driving market growth.

As of September 30, 2024, the total market participation of FIIs, DIIs, LIC, and retail investors paints a picture of a robust, diverse investor base, contributing to the resilience and growth of the Indian stock market. The continued trend of strong inflows from domestic investors and shifts in sectoral allocations suggest a market that is evolving with the changing economic landscape.

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