The investment landscape of India's NSE500 stocks has recently experienced notable shifts, with foreign institutional investors (FIIs) adjusting their portfolios significantly according to an analysis done by IIFL Institutional Equities. In the private banking sector, FIIs have reduced their stake in HDFC Bank from 16.2% to 12.7% over the past six months, a move attributed to the bank's merger activities. Despite this decrease, FIIs continue to show a strong preference for private banks overall.
Conversely, domestic mutual funds (DMFs) have demonstrated a preference for public sector banks, non-banking financial companies (NBFCs), capital goods, and pharmaceutical sectors. They have maintained a cautious stance on information technology (IT), private banks, fast-moving consumer goods (FMCG), paints, and reliance sectors, being underweight in these areas.
Both FIIs and DMFs are aligned in their underweight position on FMCG, IT, and metals & mining sectors. However, FIIs have increased their presence in midcap stocks to 13.8%, which is a rise of 1.1 percentage points. This contrasts with domestic mutual funds' more modest increase of 0.4%, bringing their stake to 9.2%.
Promoter stakes in NSE500 companies have decreased by 1.1 percentage points over the last six months, largely due to the HDFC merger's impact on shareholding structures. Additionally, the level of promoter pledge has declined year-on-year by 0.4 percentage points and by 0.2 percentage points over the last six months, now standing at 2.5% as of September 2023.
In contrast to these changes, mutual funds have actively increased their holdings in NSE500 stocks, pushing their stake up to 9.1%, which is an increase from 8.6% a year ago and 8.9% as of March 2023.
The individual investors' stake in these stocks has remained relatively stable at around 8.8%, but with a clear preference for smaller companies; they hold a notably higher stake in small-cap stocks at 14.1%, followed by mid-cap stocks at 9.1%, and large-cap stocks at 7.9%.
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