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FII ownership in Indian stocks falls to 14-year low as promoters, domestic investors gain share
Private promoters and domestic institutions increased their share of NSE-listed companies in the September quarter, while foreign institutional investors' (FIIs) ownership fell to its lowest level in 14 years, according to PRIME Database Group.
FII ownership of NSE-listed companies fell to 15.57% as of September 30, down from 15.91% at the end of June. This was the lowest level since 2012.
In contrast, private promoters' combined holding rose to 41.93%, a three-year high, from 41.34% in the June quarter. Promoters have now increased their stake for two consecutive quarters and were net buyers for the fourth straight quarter, adding Rs 6,595 crore during the September quarter.
Mutual funds' ownership also reached a fresh all-time high of 11.82%, marking the 13th consecutive quarter of increase. The combined holding of domestic institutional investors, retail investors and high-net-worth individuals rose to 28.81%, also an all-time high.
The data point to a gradual shift in India's ownership structure, with promoters and domestic institutions gaining ground while foreign investors' collective ownership continues to decline.
The gap between FII and mutual fund ownership has narrowed to 3.75 percentage points from 8.09 percentage points in September 2024. Domestic institutions collectively held 19.31% of NSE-listed companies at the end of September, an all-time high.
PRIME Database Group Managing Director Pranav Haldea said the sustained rise in promoter ownership was “a continuing telling sign of the market bottoming out”. He noted that while promoter selling can have many causes, promoter buying is “always a positive sign”.
FII ownership fell year-on-year in almost every sector except commodities and infrastructure. On a quarter-on-quarter basis, foreign investors increased their holdings in new-age companies, IT and consumer discretionary stocks.
The decline in overall FII ownership reflects both reduced net buying and the growing base of domestic savings. It does not necessarily mean foreign investors sold aggressively during the September quarter. Ownership percentages can fall even when foreign investors buy, if other categories expand faster or the overall ownership base widens.
Government promoter holding fell to 8.39%, a three-year low, after net selling of Rs 38,260 crore during the quarter. The reduction was mainly through offers for sale in LIC, Hindustan Copper and Cochin Shipyard.
LIC's stake in NSE-listed companies also fell to an all-time low, reflecting the insurer's changing portfolio composition and the broader shift in domestic institutional ownership.
The rise in promoter ownership can signal confidence, but it also reduces free float and can make stocks more sensitive to the actions of a single shareholder group. Higher mutual fund ownership, meanwhile, reflects the growing role of domestic savings through systematic investment plans (SIPs), but it also means fund flows can amplify market movements in both directions.
The decline in FII ownership reduces India's structural reliance on foreign money. However, it does not eliminate the impact of foreign flows on daily liquidity, sentiment and price discovery, particularly in large-cap stocks.
The figures are as of September 30 and reflect the latest available quarterly shareholding data. They predate November's renewed foreign buying, when foreign portfolio investors (FPIs) invested Rs 53,739 crore in Indian equities in the first nine trading days of the month, following two consecutive months of outflows.
This means the September ownership data capture the market at the end of a foreign-selling phase, while the current market narrative is being shaped by a fresh inflow cycle. The next quarterly ownership data will show whether November's buying has begun to reverse the longer-term decline in FII ownership.
The PRIME data do not, by themselves, prove that the market has bottomed out or that a durable bull phase has begun. They do, however, show that the ownership base of India's listed companies is changing: promoters and domestic institutions are becoming larger structural owners, while foreign investors' relative share has fallen to its lowest level in 14 years.
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