Ownership patterns in corporate India have witnessed significant shifts in recent quarters. Ownership in one picture -
This article delves into the details of these ownership trends across the Nifty50, Nifty 500, and NSE listed companies.
Promoter ownership has been on an upward trajectory for the fourth consecutive quarter. Specifically, promoter ownership in the Nifty50, Nifty 500, and NSE listed companies has risen by 87 basis points (bps), 73 bps, and 65 bps quarter-on-quarter (QoQ), reaching 42.9%, 50.8%, and 51.4%, respectively.
So rising trajectory in short.
This increase is primarily driven by a notable rise in government promoter share and a modest increase in foreign promoter share. However, it is partly offset by a decline in Indian private promoters’ holdings for the third straight quarter.
The government’s role as a promoter has become more pronounced, with government ownership (both promoter and non-promoter) in the NSE listed universe increasing by one percentage point in the March quarter.
This surge took government ownership to an 11.2%, the highest level in 28 quarters! No wonder elections are 9th wonder (remember, compounding is the 8th).
Similarly, the Nifty 500 and Nifty 50 indices saw increases of 106 bps and 77 bps QoQ, reaching 11.7% and 7%, respectively.
Government-owned companies experienced a strong rally, with the Nifty Public Sector Enterprises (PSE) Index generating a 16% return in the March quarter, compared to a 3% return for the Nifty 50 Index.
Foreign Portfolio Investors (FPIs) have been reducing their stakes across the board. FPI ownership in the Nifty 50, Nifty 500, and NSE listed companies witnessed declines of 81 bps, 44 bps, and 36 bps QoQ, settling at 24.3%, 19%, and 17.9%, respectively.
This marks the fourth consecutive quarter of decline, despite strong foreign capital flows amounting to USD 25.3 billion last year!
The decline can be partly attributed to the underperformance of the FPI-heavy financial sector, particularly private banks, which saw declines in the Nifty Financial Services Index and Nifty Private Bank Index by 2.3% and 5.3%, respectively.
Despite these reductions, FPIs still expanded their investment in NSE listed companies by 41% to INR 68.3 lakh crore in FY24.
FPIs have also adjusted their sector preferences, significantly trimming their outsized overweight (OW) positions in financials and maintaining a negative stance on materials, industrials, and consumer staples.
What does that mean? Overweight (OW), neutral (N) or underweight (UW) stance on any sector is with respect to the sector’s weight in the Index.
An OW/UW position on a sector implies more than 100bps higher/lower allocation to the sector than its weight in the Index. A ’N’ position on a sector implies an allocation within +/- 100bps of the sector’s weight
However, they have turned incrementally positive on India’s consumption theme, reflecting a reduced underweight (UW) position on consumer staples and a neutral stance on consumer discretionary sectors.
Domestic Mutual Funds (DMFs) have seen their share rise to all-time highs, reaching 10.5%, 9.4%, and 8.9% in the Nifty 50, Nifty 500, and NSE listed companies, respectively.
This rise is supported by sustained Systematic Investment Plan (SIP) inflows, with DMFs injecting a net amount of INR 2 lakh crore into Indian equities in FY24. Over the last three years, total net inflows have amounted to INR 5.3 lakh crore.
Within DMF holdings, passive funds’ share remained steady at 1.7%, with active funds holding the balance of 7.2%, up 11 bps QoQ. DMFs have broadly maintained their sector positions, with a strengthened OW position on large-cap financials and a cautious stance on mid- and small-cap companies in the sector.
DMFs also maintained an OW stance on large utilities companies and smaller healthcare and consumer discretionary companies while remaining bearish on the commodity sectors, particularly energy and materials.
Individual investors’ ownership declined for the second consecutive quarter, with decreases of 12 bps QoQ to 9.5%, 14 bps QoQ to 8.6%, and 11 bps QoQ to 8.1% in the NSE listed, Nifty 500, and Nifty 50 companies, respectively.
This decline occurred despite strong net investments by individual investors, which amounted to INR 52,568 crore in the March quarter, the highest in the last nine quarters.
The direct participation of individual investors has changed significantly over the past decade. In 2014, one-third of companies had fewer than 10,000 individual holders, with another 46% having individual holders in the range of 10,000 to 50,000.
Today, only 12.4% of listed companies have fewer than 10,000 holders. The share of companies with holders in the range of 10,000 to 25,000 and 25,000 to 50,000 has also shifted, with 22% and 21%, respectively.
Notably, the number of companies with more than 50,000 shareholders has more than doubled to 45.1%. There are now about 55 companies with more than 1 million individual shareholders, compared to just 7 a decade ago.
The share of Nifty 50 companies in total institutional investments fell for the fourth consecutive quarter by 123 bps QoQ to a 16-year low of 62% in the March quarter.
This shift results from higher allocations to mid- and small-cap companies and the relative outperformance of these companies.
Individual investors also saw the share of Nifty 50 companies in their overall portfolio fall to below 40% for the first time in six years, translating into an 8 percentage point decline in FY24.
Despite this, large companies continue to contribute significantly to both individual and institutional portfolios, with companies in the top decile (200 companies) by market capitalization remaining highly influential.
The ownership landscape of India Inc. is evolving, with significant shifts in promoter holdings, government stakes, FPI interests, DMF investments, and individual investor participation.
Government and domestic mutual funds have increased their presence, while FPIs and individual investors have seen declines. The trend towards mid- and small-cap companies is evident, reflecting a broader diversification in investment strategies.
As these dynamics continue to unfold, understanding the underlying factors driving these changes is crucial for investors and stakeholders navigating the complex terrain of Indian corporate ownership.
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Originally published at https://chroniclebrews.substack.com.
