Mumbai: German lender Deutsche Bank AG has shown the most confidence in Indian firms in a year that saw foreign institutional investors (FIIs) pulling out a record $13 billion (Rs67,470), the most in 15 years since India opened doors to them.
The bank remained the top holder of Indian stocks among FIIs in 2008. Though the value of its investment fell sharply due to the massive decline in stock prices, it actually invested in more firms in 2008 than 2007.
Deutsche Bank and its affiliates held Rs16,344.77 crore in Indian equities, a third of the total such assets held by the top 10 FIIs in the country.
A Mint analysis of Indian portfolios of the top 10 global investment banks, brokerages and their subsidiaries shows that the combined holdings were whittled by 78% in 2008. The stock portfolio is based on the quarterly shareholdings data available with the Bombay Stock Exchange (BSE) as on 31 December. BSE data list investors with more than 1% stakeholding.
To be sure, some of the decline in value of their holdings is due to the broad decline in stock prices. The Sensex, India’s bellwether index on the BSE, dropped 52% in 2008.
There could have been changes in their portfolios since January. The valuation of their portfolios is based on the market price of the stocks as on 1 January.
“For big insititutions, the question of survival is uppermost in their minds,” said Ullal Ravindra Bhat, managing director of the Indian arm of Dalton Strategic Partnership Llp., a global fund registered as an FII in India. “FIIs have their own problems of redemptions and lack of interest in high-risk destinations.”
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 their home markets, asked them to bring their money back.
All companies in this survey reported a drop in the value of their holdings. London-based HSBC Holdings Plc. and New York-based Citigroup Inc. own the second and third largest portfolios. HSBC owned stock worth Rs 10,400 crore in 92 companies while Citigoup had equity holdings worth Rs 8,337 crore.
These three were the only companies to report an increase in their share of total equity holdings of the top 10 firms.
Deutsche Bank increased its shares from around 25% in 2008 to a third this year. HSBC increased its market share by more than 10 percentage points to 22.85%
Among the companies that reported the biggest declines in holdings was Bear Stearns Mauritius Ltd, an associate of Bear Stearns Companies Inc., which was bought by JPMorgan Chase and Co. last year.
Merrill Lynch Capital Markets, whose parent firm Merrill Lynch and Co. was acquired by Bank of America Corp., saw its holdings erode by 85% even as it retained its No.4 spot with assets of Rs8,337 crore. Swiss bank UBS AG owned stocks worth Rs1,095.92 as on 1 January following an 87% decline in its holdings.
Deutsche Bank is the only FII that has increased its number of portfolio investments—from 84 in 2007 to 88 in 2008.
The number of firms in which HSBC has invested dropped from 126 to 92.
For Citigroup, the drop is from 180 to 112. Barring Citi, no FII remained invested in at least 100 Indian firms in 2008.
In 2007, there were five FIIs with investments in at least 100 Indian firms.