Mumbai: Foreign institutional investors, or FIIs, the largest category of investors in Indian equity markets, have cut exposure in six out of every 10 Indian stocks among the top 500 companies on the Bombay Stock Exchange (BSE) in terms of market capitalization during the October-December quarter, at a time the Sensex, the country’s most tracked stock index, fell around 25%.
Among the BSE-500 firms, 345 had announced their latest shareholding pattern till the end of last week. Of this, 218 or around 60%, witnessed a sharp drop in FII holding. Under the law, all listed companies are required to furnish their share holding pattern to the stock exchanges every quarter.
The trend among the stocks that constitute the 30-stock Sensex index and the broad-based 50-stock Nifty index is no different.
Also See Firm Decline (Graphic)
So far, 39 Nifty stocks have revealed their latest stake holding pattern and FII stakes have come down in 25 firms. Similarly, out of the 26 Sensex firms that have furnished their stakeholding data to stock exchanges, 16 have seen a drop in FII stakes. Except for one firm, Jaiprakash Associates Ltd, all Sensex firms are part of Nifty.
FIIs have been continuously paring their stakes in each of the past four quarters in at least seven of the Nifty companies that have disclosed their stakeholding pattern so far. These firms are Bharti Airtel Ltd, Mahindra and Mahindra Ltd, Oil and Natural Gas Corp. Ltd, Punjab National Bank, Reliance Industries Ltd, Reliance Petroleum Ltd and Siemens Ltd. Four of these firms are Sensex constituents.
The biggest drop in foreign investor holding among large stocks was in Tata Steel Ltd, down from 17.65% in September to less than 13% by December. Two large foreign funds managed by Goldman Sachs and Deutsche Bank AG entirely sold their 3.2% stake in Tata Steel.
Ranbaxy Laboratories Ltd and Hindalco Industries Ltd also saw a drop of between 2.5 percentage points and 3 percentage points in FII holdings during the quarter.
State Bank of India, Housing Development and Finance Corp. Ltd, Reliance Communications Ltd and India’s largest private sector firm by sales, Reliance Industries, also saw substantial drop in FII ownership, while Zee Entertainment Enterprises Ltd and Hero Honda Motors Ltd saw a substantial rise.
FII stake in Zee went up 2.19 percentage points between October and December.
Hero Honda saw a 1.88 percentage point rise in FII ownership between October and December.
Brokers and fund managers expect FII fund flows to reverse during the second half of 2009. Equity strategists also expect Indian equities to perform during the second half of 2009, given their underperformance when compared with Hong Kong and Chinese equities since October.
Japanese investment bank Nomura, in its latest India strategy report for 2009, said “The market is inexpensive despite earnings risk.” It has predicted a 15-20% earnings risk in India for fiscal 2010.
Regional equity strategists of many foreign brokerages have recently upgraded India in their Asia portfolio.
Graphics by Sandeep Bhatnagar / Mint