The disparity in the ownership of Indian companies between domestic institutional investors (DIIs) and their foreign counterparts has reached its narrowest level to date as of December 2023. Market analysts attribute this trend to the substantial inflows into mutual funds' equity schemes and pension funds, bolstering the influence of domestic institutions in the Indian stock market, historically dominated by promoters and foreign entities.

Data from primeinfobase.com indicates a consistent uptrend in DII holdings over the past decade, while foreign ownership has witnessed a decline. DII holdings in NSE-listed companies surged to 15.96% in December 2023, compared to 13.77% in December 2018 and 10.49% in December 2013. Conversely, foreign holdings in NSE-listed firms stood at 18.19% as of December 2023, down from 19.66% in December 2018 and 19.36% in December 2013. Notably, FIIs reached a peak holding of 21.21% in December 2020.

Mahesh Patil, Chief Investment Officer at Aditya Birla Sun Life AMC, remarked that the ongoing trend of domestic financialization, marked by increased household savings directed towards systematic investment plans, insurance, and similar instruments, suggests that domestic institutional ownership is poised to surpass that of foreign institutional investors in the near future. He highlighted that since 2021, DIIs' equity inflows have outpaced those of FIIs.

The share of domestic mutual funds' ownership in NSE-listed companies climbed to a record high of 8.81% as of December 31, propelled by robust net inflows amounting to ₹58,198 crore during the quarter.

In 2023, DIIs purchased shares worth ₹1.85 lakh crore, outpacing FIIs' investments of ₹1.76 lakh crore. Moreover, DIIs bought shares worth ₹2.77 lakh crore, while overseas funds divested shares worth ₹1.26 lakh crore in 2022.

Investments through systematic investment plans into mutual funds reached a new high of ₹17,610 crore in December, compared to ₹17,073 crore in November 2023.

Pranav Haldea, Managing Director of PRIME Database Group, noted that DIIs are poised to surpass FIIs in the coming quarters, with the gap between FII and DII holdings narrowing to an all-time low. DII holdings are now only 12.23% lower than FIIs'.