Promoter, government share in NSE-listed firms declines amidst market shifts

Promoter ownership in NSE-listed companies has declined for the third consecutive quarter, reaching a seven-quarter low of 50.1% as of March 2025. This drop, amounting to a 28 basis points (bps) decrease quarter-on-quarter (QoQ), was seen across various categories.

Notably, the promoter share in the Nifty 50 universe decreased by 57 bps to 40.6%, marking its lowest level in 22 years. This reduction was primarily attributed to declines in government and foreign holdings. In contrast, promoter ownership in the Nifty 500 index remained stable at 49.5% due to a compensatory rise in private Indian promoter holdings.

The government's share in NSE-listed companies fell in FY25 following a two-year increase, largely owing to the LIC listing and PSU outperformance. As of March 2025, government stakes dropped by 5 basis points quarter-on-quarter to 9.9%, the lowest in six quarters.

This decline was even more pronounced in the Nifty 50 and Nifty 500 indices, where government shares decreased by 34 and 33 basis points respectively. This trend was partly influenced by the underperformance of PSU banks, evidenced by a 10.6% decline in the Nifty PSU Bank Index.

Foreign Portfolio Investors (FPIs) have slightly increased their ownership in NSE-listed companies, a reversal from the declines observed since March 2023. By March 2025, FPI ownership rose by 12 basis points to 17.5%, driven by a rally in private banks where FPIs hold significant stakes. Excluding financials, FPI share reached a 13-year low of 15%. Their presence in microcaps increased, with holdings outside the Nifty 500 reaching a ten-quarter high.

Domestic Mutual Funds (DMFs) achieved an all-time high in their share of NSE-listed companies, aided by a 45.2% year-on-year rise in average monthly SIP inflows in FY25. Their ownership rose to 10.4% in NSE-listed entities, surpassing individual investor holdings for the first time. In Q4 FY25 alone, DMFs infused ₹1.9 lakh crore into equities, contributing to a record annual net inflow of ₹6.1 lakh crore. Passive funds within DMFs also reached a peak share of 2.0%.

Individual investors saw their direct non-promoter ownership in NSE-listed companies fall to a seven-quarter low of 9.5% in March 2025. The quarter was marked by the highest-ever monthly outflows from individuals, totaling approximately ₹15,300 crore. Although individual holdings in the Nifty 50 remained steady at 7.9%, their stake in the Nifty 500 decreased by 14 basis points to a nine-quarter low of 8.6%. Despite this, individual investors, both direct and via mutual funds, hold a record-high 18.2% of the total market cap.

There was a significant shift towards large-cap companies in Q4 FY25, as reflected by the increase in the institutional allocation to Nifty 50 companies by 3.1 percentage points to 61.8%. This shift was driven by the outperformance of large-cap stocks amidst global uncertainty and increased inflows into these firms. Similarly, individual investors raised their Nifty 50 allocation by 3.3 percentage points to 38.3%.

The Herfindahl-Hirschman Index (HHI), indicating market concentration, rose slightly in Q4 FY25, reaching a five-quarter high of 202. This rise reflects a shift towards large caps due to global uncertainties. DMFs and FPIs recorded increases in HHI, indicating broader portfolio diversification. FPIs' participation expanded notably, with holdings in 1,847 stocks, covering nearly 70% of the listed universe, up from around 1,200 in 2020.

Overall, household wealth in Indian equities has surged significantly, with an estimated increase of over ₹46 lakh crore over the last five fiscal years. This growth highlights the rising significance of individual investors in the Indian equity markets, whose share outpaced that of FPIs in FY25 for the first time since 2006.