BackFIIs raise holdings in telecom, auto, banking firms
Analysis of 438 of BSE 500 companies shows that FIIs have increased their stakes to 16.02% of total sharesthe highest in 25 quarters
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Mumbai: Foreign institutional investors (FIIs) have raised their exposure to sectors expected to benefit from a pickup in domestic growth, taking their ownership in Indian shares to new highs.
A Mint analysis of 438 of the BSE 500 companies, for which shareholding data for the July-September quarter is available, shows that FIIs have increased their stakes to 16.02% of total shares—the highest in 25 quarters. The analysis looked at companies for which data was available for at least 25 quarters.
A separate analysis of 30 Sensex companies, for which data was available for the last 16 quarters, revealed that FII shareholding in these companies rose to 19.2%—the highest since December 2010. It was 18.5% at the end of June quarter.
Economic growth in Asia’s third-largest economy rebounded to 5.7% in the quarter ended June, the fastest pace in two-and-a-half years, sparking hope of better times ahead.
In October, the Narendra Modi government decided to decontrol diesel prices and put in place a new gas pricing regime, triggering expectations of more economic reforms, after laying out a roadmap for the auction of coal blocks the Supreme Court deallocated in September.
“The resolve and the renewed enthusiasm the government has shown in pushing through the long-anticipated reforms and spelling out the exact mechanism of putting the coal blocks for auction is a clear indication the government is now accelerating reforms," said Ajay Bodke, head of investment strategy and advisory at Prabhudas Lilladher Pvt. Ltd.
Investor expectations from the winter session of Parliament and the Union budget are high. The winter session will begin on 24 November and last for a month.
In the quarter ended September, FIIs increased holdings in telecom, banking, financial services, automobiles and capital goods companies. Sectors where FIIs have trimmed their exposure are healthcare, mining, and real estate. Telecom saw the sharpest spike, as FII shareholding rose to 15.71% at the end of the September quarter from 12.96% in the preceding one.
Foreign institutional ownership in banks and financial institutions rose to 22.83% at the end of September, the highest in two years.
“Within banks, FIIs have been preferring private sector banks to public sector banks. The disparity in the level on interest is due to asset quality. It is the single biggest factor. The NPAs (non-performing assets) aren't going away any time soon," said Gautam Trivedi, managing director and head of equities (India), Religare Capital Markets Ltd.
Public sector banks have seen bad loans surge as the downturn in economic growth, which slumped to below 5% in each of the previous two financial years, and stalled projects crimped corporate profits and made it difficult for borrowers to repay loans.
In absolute terms, FIIs have the highest exposure to real estate, banks and financial institutions. They hold 23.3% of the total shares in realty companies. Interest in the realty sector, however, has dwindled. FII ownership in realty companies in the analysis dropped from 24.72% at the end of June.
FII holdings in makers of automobiles and auto ancillaries rose to the highest in 25 quarters to 20.09% from 18.94% at the end of June quarter, while that in capital goods rose to 16.34%—the highest since the quarter ended September 2011.
Repco Home Finance Ltd (RHFL) saw the highest spike in interest from FIIs, as they upped their stake by 12.8 percentage points in the Chennai-based company. RHFL went public in March 2013.
Anil Ambani-led Reliance Communications Ltd saw FII ownership rise by 10.6 percentage points. Recent filings with the BSE show that Vanguard Funds and BlackRock Funds hold 1.2% and 1.1%, respectively, in the communications provider, while in the previous quarter they did not figure in the list of shareholders holding more than 1%.
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