Mumbai: At least some Indian financial institutions raised holdings in local stocks in a year that saw the bellwether Sensex index fall 52%.
For instance, India’s oldest mortgage firm Housing Development Finance Corp. Ltd and its group firms held equity stakes in 98 companies in 2008 compared with 86 a year ago.
Also See Shrinking Values (Graphic)
Similarly, Reliance Capital Ltd, which owns India’s largest mutual fund by assets under management, held stakes in 196 firms compared with 190 a year ago.
To be sure, the value of their holdings have fallen considerably because of the fall in stock prices. Sensex, which touched a record 21,206.77 points in January 2008, dropped to 9,647.31 by December.
A Mint analysis of equity portfolios of the top 10 domestic financial groups—including life insurers, mutual funds and banks—shows that their combined holdings were whittled by 39% in 2008.
The stock portfolio is based on quarterly shareholdings data available with the Bombay Stock Exchange (BSE) on 31 December. BSE data list investors with more than 1% stakeholding. The valuation of portfolios is based on market price of the stocks on 1 January, 2009.
Life Insurance Corp. of India, the largest life insurer in the country, saw its holdings erode by 38% to Rs1.24 trillion. The equity basket of the Specified Undertaking of UTI, that took over the assets of the erstwhile Unit Trust of India, fell 37% in value to Rs18,246 crore.
Eight of the top 10 domestic financial institutions are holding stock in fewer companies compared with a year ago.
Indeed, the drop in value of their holdings has come at a time when these institutions have been massive buyers in equity markets. They pumped in Rs72,966.78 crore buying fresh stocks in 2008 even as foreign institutional investors, or FIIs, generally considered to the main drivers of the Indian equity markets, turned tail on the country.
FIIs pulled out a record $13 billion (Rs67,210 crore) in 2008, the most in 15 years since India opened doors to them. What started as profit-booking in early 2008 accelerated into a massive sell-off following the September collapse of US investment bank Lehman Brothers Holdings Inc., leading to a severe liquidity crisis.
Most FIIs sold as their lenders, facing a cash crunch in home markets, asked them to bring their money back. This, coupled with the market meltdown, saw collective holdings of the top 10 FIIs in the country erode by 78%.
Even as FIIs continue to sell, domestic financial institutions continue to buy. This year, so far, the latter have bought some Rs8,774.06 crore worth of equities. In contrast, FIIs have sold $2.2 billion more than they bought in Indian stocksso far.
“The last quarter (of a fiscal year) is typically the best for inflows since a lot of money comes into the insurance industry,” said Sandesh Kirkire, chief executive of Kotak Mahindra Asset Management Co. Ltd. Kirkire said the mutual funds are sitting on a large pile of cash “but for domestic institutions to be fully invested, uncertainty must go”.
The Sensex rose 412.86 points, or 4.95%, on Friday to close to 8,756.61. The broad-based 50-stock S&P CNX Nifty on the National Stock Exchange gained 101.8 points, or 3.89%, to close at 2,719.25. However, this in no way indicates the outlook on equity markets.
Graphics by Paras Jain / Mint