The majority of India’s wealth in the capital market is pooled into the top 40 listed companies. Data from the recently published annual report of SEBI show that the top 40 stocks in terms of market capitalisation account for nearly three-fourths of the total holding of both domestic mutual funds and foreign portfolio investors (FPIs) in India.
According to the report, MFs have invested 63 per cent or nearly ₹6.5 lakh crore of investor wealth into the top 40 listed company stocks. The same top 40 stocks account for 74 per cent or ₹21.59 lakh crore of FPIs’ equity holding in India. The total market capitalisation of India’s equity market is more than ₹1.58 lakh crore. The total equity assets under FPI custody stood at around ₹29.18 lakh crore. Both the BSE and the NSE together have over 7,000 listed stocks but brokers say that concentration of wealth in the top few companies is a global phenomenon.
“If you look at the US markets, the top five stocks in the Dow Jones index or the NASDAQ have nearly $4 trillion worth of investments into them, which is roughly 50 per cent of the entire US equity market. Passive funds often park majority of their money into the most liquid counters that will give them an exit opportunity in dire times,” said Deven Choksey, founder, KR Choksey Investment Advisors.
“This is why large companies grow even bigger in market-cap as they draw a large portion of the entire investment. Even in the start-up world, Paytm and Amazon have a lion’s share of investments and investors do not mind even if they make losses,” he added.
In India, HDFC Bank, Infosys, RIL, TCS and HUL are the ones attracting huge investments. These five have driven 97 per cent of the market’s rise to record highs.