By The Indian stock market is witnessing a significant shift toward self-reliance, with domestic investors steadily increasing their presence. As of June 30, 2024, the shareholding of domestic investors in the Indian markets reached an all-time high of 25.85%, according to a report from PRIME Database. This marks a pivotal moment in the market’s dynamics, as the influence of Foreign Institutional Investors (FIIs) continues to wane, reaching a 12-year low.
For years, FIIs have played a dominant role in the Indian stock market, often being the largest non-promoter shareholder category. Their investment decisions have traditionally had a substantial impact on the market’s direction. However, this trend is now changing.
Pranav Haldea, Managing Director of PRIME Database Group, highlighted this shift, noting that the market is rapidly moving towards “Atmanirbharta” (self-reliance). He suggested that the share of Domestic Institutional Investors (DIIs) is poised to overtake that of FIIs in the coming quarters, a development that would have been unthinkable just a few years ago.
The growth in domestic shareholding is driven by a combination of DIIs, retail investors (those with up to ₹2 lakh in shareholding), and High Net Worth Individuals (HNIs) (those with more than ₹2 lakh in shareholding). Together, these groups now hold 25.85% of the market, an all-time high. This is a significant milestone, reflecting the increasing confidence and participation of Indian investors in their own markets.
The quarter ending June 2024 saw DIIs increasing their share from 16.07% to 16.23%, while FIIs reduced their holdings. FIIs pulled out ₹7,693 crore from the Indian stock market during the quarter, leading to a decline in their share to 17.38% from 17.72% in the previous quarter.
This pullback has narrowed the gap between FII and DII holdings to its lowest level ever, with DII holdings now just 6.60% lower than those of FIIs. The FII to DII ownership ratio has decreased to an all-time low of 1.07, a stark contrast to the 1.99 ratio observed in March 2015.
Domestic Mutual Funds (MFs) have also seen an increase in their share of NSE-listed companies, reaching an all-time high of 9.17% as of June 30, 2024, up from 8.93% at the end of March 2024. This growth has been fueled by strong net inflows of ₹1.09 lakh crore during the quarter. The rising influence of MFs is another indicator of the growing power of domestic investors.
Retail investors have also made their mark, with their share rising to an all-time high of 7.64% as of June 30, up from 7.52% at the end of March. Although the share of HNIs decreased slightly from 2.00% to 1.98%, the combined share of retail and HNI investors increased to 9.62%, up from 9.52%. This increase reflects the broader trend of greater participation from individual investors in the stock market.
On the other hand, Life Insurance Corporation of India, the country’s largest institutional investor, saw its share decrease to an all-time low of 3.64% across 282 companies where its holding is more than 1%. This decline occurred despite LIC’s net buying of ₹12,400 crore during the quarter. Given LIC’s significant role, commanding at least 70% of investments in equities by insurance companies, the overall share of insurance companies in the market also dropped from 5.40% to 5.23%.
The Indian government’s stake as a promoter has increased to a 7-year high of 10.64%, driven by the strong performance of several Public Sector Undertakings (PSUs). In contrast, the share of private promoters declined to a 5-year low of 40.88%. This decline is attributed to stake sales by promoters seeking to capitalize on bullish markets, relatively lower promoter holding in some IPO companies, and the overall institutionalization of the market.
This evolving landscape of the Indian stock market suggests a future where domestic investors will play an increasingly critical role. The shift towards self-reliance, or “Atmanirbharta,” signals a new era for the market, where the influence of foreign investors is diminishing, and the confidence of Indian investors is rising.
