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Most blue chip companies did not find favour with domestic institutional investors even as foreign institutional investors went on a buying spree last fiscal. Twenty six out of 30 stocks that make the S&P BSE Sensex reported a fall in DII holding in the last 12 months. Foreign institutional investors shored up presence in an equal number of stocks, shareholding data on the BSE suggests.
Strong redemption pressure faced by domestic mutual funds and insurance companies have compelled DIIs to sell stake in companies, said Sandeep Singal, co-Head — Institutional Equities, Emkay Global Financial Services.
Waning since 2009
According to Rajesh Cheruvu, Chief Investment Officer, RBS Private Banking, India, AUMs of domestic equity mutual funds shrunk by about Rs 24,000 crore and overall DIIs were net sellers to the tune of Rs 69,000 crore worth equities in the last fiscal.
“DIIs’ interest has been waning in the equity markets since July 2009 following the change in regulations for both mutual fund and insurance segments with respect to distributor incentives. Also, high inflation in the last two years combined with the attractiveness of fixed income returns caused shift in investment allocations from equity to debt,” he added.
The number of equity-oriented DII folios have halved to 1,296 as on March 31, from 2,727 three years ago, according to Association of Mutual Funds in India’s data.
“DIIs manage small retail investors’ money, many of whom are pulling back their investments in equity largely because other asset classes such as real estate and gold are perceived to be more lucrative,” said Gaurav Dua, Director — Research, Sharekhan Securities.
The exposure of Indian households to shares and debentures has been steadily coming down since 2009-10, according to RBI data. In 2009-10, households invested Rs 44,841 crore in shares and debentures. In the following year, the investment came down by Rs 1,729 crore. In the latest financial year for which data is available (2011-12), households pulled out investments aggregating to Rs 6,508 crore.
On the other hand, FIIs have been net buyers for all but two years (2001 and 2008) ever since the economy was liberalised in 1991, according to Dua.
global interest
The growing interest among central banks worldwide to invest their reserves into equities is also contributing to this trend. In the last calendar year, an additional $700 billion was injected into the reserves of central banks globally, swelling their collective corpus to about $11 trillion. Some part of it could have found its way into bonds and equities in India.
Analysts foresee that DIIs will continue to be in ‘sell off’ mode for the coming few quarters till the high inflation regime persists.
The only four Sensex stocks where DIIs upped stake during the course of the year are NTPC (from 7.66 per cent to 10.46 cent), CIL (from 1.75 per cent to 1.99 per cent), Hindalco (from 14.94 per cent to 15.49 per cent) and Reliance Industries (from 10.71 per cent to 11 per cent).
FIIs reduced their holdings in Tata Steel (from 14.38 per cent to 13.87 per cent), Hero MotorCorp (from 33.38 per cent to 30.57 per cent), Hindalco (from 26.85 per cent to 24.47 per cent) and Jindal Steel (from 21.74 per cent to 22.14 per cent).
> adith.charlie@thehindu.co.in
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