The Indian benchmark equity indices have staged a sharp rebound from their March lows and are in line to recover almost all losses for CY20 in tandem with the rise in global equity markets. The rally in world markets is fueled by massive liquidity inflows by global central banks and stimulus packages by various governments across the world to support the economy from COVID-19 disruptions.

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On the domestic front, Nifty-50 and Nifty Midcap-100 have recovered around 50 percent and 52 percent respectively from their March 2020 lows. Foreign capital inflows, better than expected corporate earnings, buying in beaten-down quality stocks, cheap valuations, among others are the reasons behind the recent up move in the markets.

In the quarter ended June, the Foreign Institutional Investors (FII) and Domestic Institutional Investors (DII) DIIs both saw inflows of $1.7 billion and $4.2 billion. However, divergent sequential trends are being witnessed between FII and DII purchases.

According to a report by Motilal Oswal, while the FII holdings in the Nifty-500 remained near 5-year lows in Q1FY21, the DII stake in Nifty-500 hit a 5-year high.

In Q1FY21, FII holdings marginally increased by 8 bps compared qaurterly but declined 130 bps year on year to 20.8 percent. DII holdings were also marginally up in the Nifty-500 by 7 bps and 90 bps to 14.7 percent.

FIIs have reduced ownership in 68 percent of Nifty-500 and 74 percent of Nifty-50 companies and DIIs have raised stake in 50 percent of Nifty-500 and 68 percent of Nifty-50 companies sequentially.

While DIIs increased weights in Telecom or Technology sectors, FIIs have reduced their stake. On the other hand, FIIs increased weights in Oil and Gas (O&G), Capital Goods and Retail, while DIIs trimmed their QoQ, according to the report.

FIIs reduced stake in 74 percent of Nifty-50 companies on QoQ basis, while DIIs increased stake in 68 percent of Nifty-50 companies. Kotak Bank, HUL, HDFC Life Insurance, L&T and Asian Paints were the top stocks to witness an increase of more than 1 percent in FII holdings on QoQ basis.

JSW Steel, SBI, Power Grid, Hero Moto and Bharti Infratel were the top stocks to see a decline in FII holdings by more than 1.5 percent QoQ basis.

Top increase in DII holdings in Nifty stocks was seen in Kotak Bank, Bharti Airtel, Hero Moto, HUL, Power Grid and M&M which saw an increase of more than 1.5 percent. L&T, Grasim Industries, Cipla and Zee saw declines in DII holding by more than 1 percent on QoQ basis.

Among sectoral trends, in the Nifty-500, FIIs have the highest ownership in Private Banks (44 percent), followed by NBFCs (31.6 percent), O&G (22.4 percent), Telecom (20.6 percent) and Real Estate (20.5 percent). DIIs have the highest ownership in Capital Goods (22.1 percent), Metals (21.5 percent), Private Banks (20.2 percent), Utilities (18.8 percent) and Autos (16.3 percent), the report added.

Meanwhile, a mixed trend was witnessed in promoter stake holdings which declined marginally by 15 bps QoQ, but was up 140 bps YoY to 50.6 percent.