Domestic investors’ stake in Indian firms highest in 25 quarters

Domestic mutual funds and insurance company holdings in India’s largest listed companies rose to their highest level in at least 25 quarters as household savings shifted from gold and real estate into financial assets.

At the end of September, domestic institutions held 10.8% stake in the BSE 500 index, which accounts for at least 90% of India’s market capitalisation. Only 424 of these 500 firms, whose data goes back to 25 quarters, were considered for this analysis. That was a rise from 10.52% at the end of June and 9.6% a year ago.

“Post demonetisation, we have witnessed a distinct shift from physical savings to financial savings, and we believe that this trend will likely continue,” said Unmesh Kulkarni, MD and senior adviser, markets and advisory solutions, at Julius Baer Wealth Advisors (India) Pvt Ltd.

In the September quarter, domestic institutional investments in local stocks was a record ₹41,507.41 crore; for the year ending September, they were almost at ₹98,166.76 crore. The continued buying has pushed stocks to new highs. Since the beginning of 2017, the BSE 500 has gained 28.15%, outperforming MSCI Emerging Markets Index. The gains for the Sensex and Nifty were slower at 21.5% and 23.8%, respectively.

However, foreign institutions’ net purchases during the 12 months ended September was $909.76 million, a fraction of local buying. Foreign institutional stake in these set of firms fell to 20.32% from 20.73% a year earlier.

Foreign investors “are worried about low GDP, inflation data, slow growth in earnings and rich valuations of Indian firms. Earnings will take at least twothree quarters to recover as Indian firms overcome the transitional woes caused by GST,” said Sanjeev Zarbade, vice-president at Kotak Securities.

MUMBAI: