FPIs have larger slice of the pie

Over the past seven years, FPIs have gradually cemented their hold on the market with their stake in the CNX 500 index climbing. Though their stake did take a dip following the global meltdown in 2008-09, their holding was quickly built back up. From holding 16 per cent of the total market capitalisation of the CNX 500 at the start of 2008, FPIs have taken this share up to 22 per cent of total market cap by December 2014. Of the free-float market capitalisation, FPIs now hold 42.8 per cent against the 31.8 per cent at end-2008.

The rise in FPI holding has coincided with a drop in both promoter and domestic institutional shareholding. Stake of the promoter group of the total market capitalisation of the CNX 500 dropped below the 50 per cent mark by the end of 2012. This drop is partly due to the need to comply with SEBI directives and bring up public shareholding to a minimum of 25 per cent. In stocks such as Astrazeneca Pharma, Century Plyboards, DLF, Engineers India, HDIL, Page Industries, Tech Mahindra and so on, a big drop in promoter holding was taken up mostly by FPIs.

While FPIs steadily raised their market share, domestic institutions maintained theirs. MFs hold just over 4 per cent of the CNX 500 by total market capitalisation, virtually unchanged from the 3.9 per cent at end 2008. The same holds true for insurance companies, which have long held around 6 per cent of the market capitalisation of the CNX 500.

MFs have not hiked or pared stakes by a significant margin in many stocks over the years, at least compared with FPIs. This is likely because most funds tend to take relatively longer-term views on stocks they hold and don’t makeover their entire portfolio depending on the market. Activity by insurance companies is even slower and these investors hardly ever bump up stake by large margins.

This apart, with markets yo-yoing from 2010 to 2014, equity investors responded similarly, alternately pulling out and jumping back into equities. For instance, average equity assets under management for both 2011 and 2013 dipped over 10 per cent. Mutual funds, therefore, didn’t have as much room to shift holdings as FPIs.