FPI ownership in Indian equities rises sharply in Q3FY21

Foreign portfolio investors (FPIs) ownership surged sharply in the December quarter on strong capital flows. Among institutional investors, FPI ownership surged by 120 basis points (bps), quarter-on-quarter (q-o-q) to 21.7 per cent. This was the steepest sequential increase in the last 31 quarters, largely reversing the sharp drop seen in the first half of 2020, revealed NSE's latest ownership tracker report. 

The overseas investors' stakes in Q3FY21 rose by 169bps, 134bps, 120bps sequentially to 27.6 per cent, 22.5 per cent and 21.7 per cent in the Nifty 50, Nifty 500 and the overall NSE-listed universe respectively. This was the steepest sequential increase seen in the last 46 quarters for the Nifty 50 as well as Nifty 500 universe.

This was reflected in strong foreign portfolio inflows into Indian equity markets in the December quarter (US$20 billion), supported by ultra-loose global monetary or fiscal policies and positive global cues including abating US Presidential election and Brexit uncertainty, the report said.

The increase in FII ownership was primarily led by financials where FPIs shareholdings shot up by 161 bps after falling over the previous three quarters. Excluding financials, their ownership in the listed universe actually declined by 41 bps q-o-q in the third quarter.

The sector stance of FPIs remained broadly stable during the quarter-- strengthened their outsized bet on financials at the expense of a sharp reduction in allocation to energy, a part of which reflects the underperformance with respect to broader markets, it highlighted.

Foreign ownership has ranged between 19-22 per cent over the last eight years. Their shareholding in the NSE-listed space saw a gradual increase between 2002 and 2015, except for a brief period around the 2007-08 financial crisis. It thus dropped marginally over the subsequent three years followed by a sharp pickup over the next two years until December 2019. It however, fell sharply during the first two quarters of 2020 but rose meaningfully in the second half, supported by strong foreign capital inflows.

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