Mumbai: For the third year in a row, Germany’s Deutsche Bank AG has emerged the top holder of Indian stocks among foreign institutional investors (FIIs) with a portfolio valued at $7.11 billion (Rs33,061.5 crore today) as of September.
Germany’s biggest bank by assets is followed in the rankings by London-based HSBC Holdings Plc and Citigroup Inc., the third largest US lender.
Deutsche Bank’s share among the top 10 FIIs stayed stable at one-third this year. HSBC owned stock worth Rs24,598.5 crore in 92 companies and Citigroup had equity holdings worth Rs14,647.5 crore. HSBC’s share rose by more than 2 percentage points to 25%.
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This is the third consecutive year that Deutsche Bank has emerged the leader among FIIs in India since Mint started an analysis of investments by the top 10 global investment banks, brokerages and their subsidiaries in India.
The Mint analysis shows that the combined holdings of the top 10 FIIs appreciated 92% in 2009. The stock portfolio is based on the quarterly shareholdings data available with the Bombay Stock Exchange (BSE) as of 30 September. BSE data lists investors that have at least a 1% stake.
This analysis is limited to portfolio investments by FIIs in listed firms. Private equity investments and investments by entities not registered as FIIs with the market regulator, the Securities and Exchange Board of India, have not been included.
Also, it is likely that there have been changes in portfolios since October. The valuation of portfolios is based on the market price of the stocks as of 4 December.
Foreign institutions have been big buyers of Indian stocks this year, pumping in $12.44 billion through September. They have brought in another $4 billion since, taking the 2009 inflows till 10 December to $16.57 billion, a number that is lower only than the $17.8 billion they invested in 2007.
Last year, they fled in droves as the financial sector in the US and Europe imploded, taking with them a record $12.18 billion, the most in 15 years since India opened its markets to FII investment.
The institutional inflows are expected to continue in 2010, as funds chase higher returns, said Vikas Agnihotri, chief executive officer of Religare Macquarie Wealth Management Ltd.
“The growth rates in emerging markets are much higher. There is easy liquidity in the market and there are not too many places where this money can go. India, China and Indonesia are the few economies which are expected to continue to grow over the next few years,” Agnihotri said.
Among the companies that reported the biggest declines in holdings were Merrill Lynch Capital Markets, which was taken over last year by Bank of America, and Fidelity Trustee Co. Pvt. Ltd. Merrill’s portfolio declined from Rs3,281 crore to Rs2,604 crore, while Fidelity saw a fall from Rs7,383 crore to Rs5,859 crore.
The biggest gainer was US bank Morgan Stanley and Co.—whose clients in the so-called participatory notes market had moved to Deutsche Bank during the financial crisis of 2008—with holdings rising in 2009 to Rs3,906 crore. Participatory notes are offshore derivative instruments.
Nearly 90% of Deutsche Bank’s assets are parked in just one holding—ICICI Bank Ltd. The stake of Deutsche Bank Trust Co. Americas,a subsidiary, in India’s largest private sector lender is worth Rs29,003 crore.
The value of overseas investments have risen sharply due to a continuing rally in stock prices; the Sensex, which is BSE’s bellwether index, rose 77.53% between January and September.
Central banks across the world eased monetary policy to pump liquidity into a financial system that seized up after the September 2008 collapse of Lehman Brothers Holdings Inc.
What started as a relief rally in March, accelerated following the re-election of the Congress-led United Progressive Alliance in the April-May Lok Sabha polls.
A significant portion of FII inflows has come via the qualified institutional placement (QIP) route. During the calendar year 2009, Indian firms raised Rs31,102 crore in 42 QIPs, which are private placements of stock or securities convertible into equity by listed entities.
However, FII inflows pale in comparison with investment by domestic institutions. State-owned Life Insurance Corporation of India alone holds around $50 billion of stock.
Graphics by Sandeep Bhatnagar / Mint