Higher return on shares of foreign invested companies than domestic investors

The bull run that started at the end of March in the Indian stock market has stopped a month ago. This dream rally has stopped for the last 4 weeks, but analysts are seeing the possibility of a bullish trend in the market in the near future. However, foreign investors have made a valuable contribution to the boom in the stock market for the last 3 months. After 3 years, foreign institutional investors have become buyers in both debt and equity markets. However, a recent report has interestingly revealed that stocks with more foreign investment have seen higher gains than stocks with domestic investment, meaning that investments held by big-caps have had relatively better returns.

According to the report, stocks where foreign portfolio investors have increased their cash flow have recorded higher returns than stocks bought by other investor segments such as retail, insurance and mutual funds. FPIs increased their shareholding in 687 National Stock Exchange-listed companies during the quarter ended June 2023, according to an analysis conducted by PrimeInfobase. Share prices of these companies increased by an average of 30 percent during the June quarter against the 13 percent growth in the Nifty-500.

Meanwhile, the share prices of 908 companies (in which retail shareholders increased their stake) rose by an average of 21 percent. The shocking figure is that the lowest growth was recorded among the 50 stocks in which India's largest institutional investor, Life Insurance Corporation of India, increased its stake to just 12 percent.

On the other hand, retail investors reduced stakes in 885 companies, but their share prices increased by 28 percent. Also there were 608 stocks in which FPIs reduced their exposure but their share prices increased by up to 21 per cent.

A comparison of shareholdings and price changes shows that global investors have a broad influence on share prices. Between April and June, FPIAs in the local stock market traded around Rs. 1.1 lakh crore had been invested. He has invested around Rs. 44,000 crore and in automobile sector Rs. 16,818 crore had been invested. However, FPIA during June quarter from IT stocks Rs. 9,376 crore was withdrawn.

According to the report, the Nifty Financial Services and Nifty Auto indices rose 11 percent and 23.7 percent respectively during the April-June quarter of 2024, while the Nifty IT index gained 3 percent.