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Stock Analysis, IPO, Mutual Funds, Bonds & More

Domestic institutional investors zero in on just top 50 companies

In comparison, foreign institutions have 63 per cent of investments in these companies.

, ET Bureau|
Oct 17, 2019, 07.40 AM IST
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Sebi issued a circular in October 2017 defining large-cap, midcap and small-cap companies in order to ensure uniformity for the universe of equity mutual fund schemes.
Around two years ago, Uday Kotak had raised concern over India’s savings flowing into a few hundred stocks, which increased the risk of an equity market bubble. The latest data show that this number has actually shrunk to just 50. The top 50 companies by marketcap have attracted nearly 77 per cent of the total domestic institutional investments. In comparison, foreign institutions have 63 per cent of investments in these companies.

This proportion of the domestic institutional investments in the top 50 companies has more than doubled in the past two years after market regulator Sebi enforced categorisation rules on mutual funds and restricted the flows into the mid- and small-cap companies. Outside the top 200 companies, domestic institutions have only 4 per cent holding.

Sebi issued a circular in October 2017 defining large-cap, midcap and small-cap companies in order to ensure uniformity for the universe of equity mutual fund schemes. This along with flight to safety following the carnage in smaller stocks and lower liquidity outside top 50 stocks have further led to incremental flows into larger stocks, according to fund managers. This explains the widening gap between the large and small companies — the NSE small cap index has underperformed the broader Nifty by 40 per cent over the past two years.
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