Institutional Ownership Trends and Sector Preferences in 1Q 2024

Institutional ownership witnessed a notable decline in the first quarter of 2024, primarily driven by a sharp fall in Foreign Portfolio Investor (FPI) ownership. Particularly, FPIs significantly reduced their positioning in the Financials sector, marking its lowest level in a decade. On the contrary, Domestic Institutional Investors (DIIs) continued to bolster their positions in the Financials sector, making it the favored sector due to favorable valuations and anticipated growth prospects.

1. Resilience of Domestic Investors: Despite marginal fluctuations, domestic institutional ownership remained near its peak, while FPI ownership experienced a considerable decline both sequentially and year-on-year. Direct household ownership also saw a slight dip, while controlling stakeholders' ownership surged notably.

2. FPI Portfolio Dynamics: FPIs exhibited a rise in portfolio churns, with average sector positions declining. However, domestic institutions displayed an increase in active positions, indicating differing investment strategies. A macro trade trend is discernible, with a potential peak expected in the near future.

3. Contrarian Buying in Financials: Overweighting Financials, domestic cyclicals (Consumer and Industrials), and Technology sectors emerged as a key strategy. FPIs, despite reducing positions in Financials, remain overweight, contrasting with our recommendations. Notably, domestic institutions adjusted their underweight positions in various sectors.

4. Stocks Landscape: Among the top 20 aggregate institutional holdings, M&M observed the highest rise in active positions, while HDFC Bank (NS:HDBK) experienced a decline. Notable shifts in ownership were observed across companies, with varied trends in FPI, Domestic Mutual Fund (DMF), and Domestic Financial Institution (DFI) positions.

The first quarter of 2024 witnessed significant shifts in institutional ownership, with divergent strategies adopted by FPIs and domestic institutions. The Financials sector emerged as a focal point for both, reflecting nuanced market dynamics and strategic positioning amidst evolving market conditions.

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