FII shareholding in Indian firms is fast approaching all-time high of 22 per cent, as overseas institutional investors stepped up purchases during the quarter ended September 30.
According to a research report by global investment banking major Morgan Stanley, the foreign institutional investors (FIIs) raised their aggregate holding in the country's top 75 companies to a six-year high level of 21.6 per cent in the July-September quarter.
The increase in FII holding in these companies, from 19.3 per cent at the end of April-June 2012 quarter and just shy of the record of 22 per cent, scaled in mid-2005, has taken the aggregate value of overall FII holding in these firms to an estimated $240 billion.
The promoters, meanwhile, have reduced their stakes to the lowest level in the nine and a half years, while domestic institutions have also lowered their holding.
"In Q3, 2012, FII ownership rose to 21.6 per cent (almost a 6-year high) and 19.3 per cent (5-year high) for the top 75 companies and the broader market. Their stakes in the top 75 companies rose by 1.4 per cent. As of September 2012, we estimate the value of FII holdings to be $240 billion, up 18 per cent quarter-on-quarter," the report noted.
Most of the foreign entities trade in Indian stocks through FII route and market analysts said that the overseas investors appear to have been enthused by stability in the equity market during the last quarter.
Morgan Stanley said that Indian financial institutions (FIs) and mutual funds (MFs) reduced their stakes marginally by 10 basis points. Domestic FIs now hold 8.8 per cent in Indian companies, while MFs hold 3.6 per cent.
Besides, promoters have reduced their stake to 51.6 per cent in the September quarter, the lowest level in nine-and-half-years, down from 52.7 per cent from the preceding quarter.
During the quarter, maximum buying was seen in energy space by FIIs and offloading was witnessed in consumer discretionary sector.
Among the top 20 stocks, HDFC saw the maximum buying, while Infosys witnessed most selling in the three months ended September quarter.
"For FIIs, the largest selling and buying was seen in Infosys and HDFC respectively. Their biggest over weight and under weight are ICICI bank and Reliance Industries, respectively," the report noted.
FIIs infused a net amount of about Rs 40,000 crore (Rs 400 billion) in the entire Indian stock market in July-September quarter on the back of a slew of reforms initiated by the government, pushing the broader market Sensex to surge over 1,300 points or more than seven percent during the period.