Domestic investors are about to become larger holders of Indian equities than foreign portfolio investors (FPIs) for the first time since 2010, foreign brokerage Morgan Stanley said in a report.
Domestic share holdings continue their ascent, the report said. The combined holdings of domestic mutual funds and direct households in stocks have risen over 600bps since 2015 whereas those of foreign portfolio investors (FPI) have declined about 150bps.
This shift persisted for the QE March 2022. FPI ownership of our sample of 75 companies fell 75bps QoQ, whereas domestic investors raised stakes 81bps, the report said.
Average sector positions went a tad higher in the latest quarter after multiple quarters of decline. FPIs continue to run more active portfolios than domestic institutions. We opine that there has been a transition from a stock-pickers' market to one that is macro driven, implying that sector positions should widen.
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FPIs are overweight on Financials but continue to trim, now to a 19-quarter low. While their raised Technology position was upped to neutral during the quarter, Energy and Healthcare were heavily purchased. FPIs are underweight on Consumer Discretionary and Industrials, distinct from our recommendations.
Domestic institutions also added heavily to Energy and trimmed Technology. They are underweight on Financials and Technology and overweight on Communication Services, Consumer Staples and Utilities in divergence from our advice. The only sector where we are in sync is Industrials, the report said.
From among the top 20 aggregate institutional holdings, active positions (relative to the MSCI Index) rose the most for Reliance as institutions probably had to catch up with the stock's outperformance. They declined the most for HUL during the QE March 2022.
