Foreign portfolio investorsmade the biggest move among institutional investors. They increased their Nifty 50 exposure by 3.6 percentage points to 63.8 percent
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FRANCIS MASCARENHAS

 Institutional investors’ holding in Nifty-50 stocks, after hitting a 25-year low in the December quarter, regained favour with investors during March quarter as market nerves and relative outperformance of large-caps drove a shift back to blue-chip names. 

Institutional investors led the charge, raising their allocation to Nifty 50 companies by 3.1 percentage points quarter-on-quarter to 61.8 percent—a four-quarter high. This increase was faster than the Nifty 50’s own rise in market capitalisation by 2.8 percentage points, “indicating a renewed preference for large-cap stocks among institutional investors,” a report by NSE said.

Foreign portfolio investors (FPIs) made the biggest move among institutional investors. They increased their Nifty 50 exposure by 3.6 percentage points to 63.8 percent, bouncing back from a 24-year low in December. Domestic mutual funds followed with a 3.1 percentage point rise to 55.9 percent, while banks, financial institutions, and insurers increased their exposure to 67.3 percent.

Retail investors mirrored this trend too. Their Nifty 50 holdings rose from a 22-year low of 35 percent in December to 38.3 per cent in March — a jump of 3.3 percentage points in just one quarter. However, this still lags the index’s weight of 45.9 percent in the broader market, suggesting retail investors are still more active in smaller companies.

Mid, Small-caps’ allure

Since the pandemic, retail investors have increasingly ventured into broader markets. Their exposure to companies outside the Nifty 500 rose by 1 percentage point to 19.3 per cent in March 2025, with free-float ownership climbing to 44.2 percent.

Even the share of Nifty 50 in institutional portfolios remains well below its pre-pandemic peak of 72.4 percent, reflecting a longer-term tilt towards mid- and small-cap stocks. “This shift has been driven by both sustained flows into mid- and small-cap funds and the relative outperformance of these segments in recent years,” the report said.

For instance, over the five years ending March 2025, the Nifty Midcap 50 and Nifty Smallcap 50 delivered stellar annualised returns of 35.6 percent and 34.7 percent respectively, significantly outpacing Nifty 50’s 22.3 percent.

However, a decile-wise breakdown of portfolios shows some tilt towards quality blue-chip companies last quarter. The top 10 percent of NSE-listed companies by market cap — roughly 210 stocks — saw increased allocation across all investor types.

Individual investors upped their exposure to this group by 2.8 percentage points to 65.9 percent, while DMFs and FPIs raised theirs to 82.6 percent and 89.1 percent respectively. Banks and insurers remained the most concentrated, with over 99 percent of their portfolios in the top three deciles.

Published on May 29, 2025