As the Indian market experiences a notable correction after a four-year bullish trend earlier this year, foreign investors have begun to discreetly reduce their holdings in major stocks. In contrast, domestic investors, encompassing institutions, mutual funds, and retail participants, have collectively emerged as net buyers in these leading companies. These domestic entities succeeded in acquiring approximately 1.1 percentage points of stake in these firms, marking the highest increase seen in 28 quarters. During the same period, retail investors amplified their stakes by 0.4 percentage points, raising their ownership to 14.4%, signifying the first uptick in two years.
Conversely, foreign institutional investors (FIIs) have continued to divest from these stocks for the third consecutive quarter, pulling their stakes down by 2.6 percentage points from the peak recorded in September 2005, as highlighted in a recent report. Notably, however, FII interests in the top 20 holdings have seen a significant rise, climbing to 71.3% from 70% as of December 2007.
Over the past 28 quarters, retail investors have only participated as buyers in the stocks of these prominent companies on seven occasions, contrasting with FIIs, who have actively invested in 17 of these 28 quarters.
In addition to scaling back their holdings in the 75 top firms, FIIs continue to realign their portfolios both at the individual stock level and across sectors. According to the Morgan Stanley report, FIIs currently exhibit a pronounced emphasis on just three sectors: telecom, financials, and consumer discretionary.