Taking advantage of bearish market sentiments, domestic mutual funds, financial institutions and retail investors have hiked stakes in local stocks by 44 basis points during the September quarter even as total shareholding of foreign institutional investors fell by 40 basis points over the previous quarter, a Morgan Stanley report said.

FIIs’ holdings in 1,200 companies were worth $215 billion at the end of September, down 21 per cent from the end of June quarter, the report said.

As the benchmark Sensex fell 12 per cent during the quarter, mutual funds were net buyers of equities to the tune of nearly Rs 2,450 crore. While overseas investors bought shares worth over Rs 7,000 crore in July, they turned net sellers to the tune of over Rs 11,000 crore in the next two months amid weak global market sentiments.

During the June quarter, domestic investors increased stakes by 37 basis points, while overseas investors steadily reduced exposure to local equities over the past three quarters, the report said. Overseas investors cut their holding in ICICI Bank by 0.8 per cent, upped it in Bharti Airtel by 0.2 per cent to 3.3 per cent and by 0.7 per cent to 2.2 per cent in Mahindra & Mahindra, the report said.

Domestic mutual funds cut exposure to Reliance Industries by a whopping 2.2 per cent to 4.1 per cent from 6.2 per cent in June quarter, and brought down stake in Infosys by 0.4 per cent to 4.1 per cent.

However, riding on the back of rising consumption boom in the country, domestic funds increased stake in ITC to 12.2 per cent, while in Bharti Airtel they raised it by nearly 1 per cent to 3.3 per cent. Joining mutual funds, domestic financial institutions reduced holdings in RIL by 1.3 per cent to 7.1 per cent amid worries of falling gas output from its priced KG basin and lower petrochemical margins put off investors from the counter. Overall institutions seemed most overweight on telecom and consumer staples, whereas they are most underweight on technology and materials, Morgan Stanley’s Ridham Desai and Sheela Rathi said in a note.