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FIIs cut stake in India's biggest companies in June quarter

Shareholding by FIIs in Nifty 500 companies was at 21.7% in June quarter compared to 22.3% Q1, but increased from 20.8% in June quarter of previous fiscal.Premium
Shareholding by FIIs in Nifty 500 companies was at 21.7% in June quarter compared to 22.3% Q1, but increased from 20.8% in June quarter of previous fiscal.

  • Foreign institutional investors (FIIs) holding in the Nifty 500 companies was down 60 basis points while domestic institutional investors (DIIs) stake slipped 10bps at the end of June quarter compared to preceding three months, based on data analysed by Motilal Oswal Financial Services Ltd.

MUMBAI: Institutional shareholding in India’s biggest listed companies reduced slightly in the three months ending June. Foreign institutional investors (FIIs) holding in the Nifty 500 companies was down 60 basis points while domestic institutional investors (DIIs) stake slipped 10bps at the end of June quarter compared to preceding three months, based on data analysed by Motilal Oswal Financial Services Ltd.

Shareholding by FIIs in these set of companies was at 21.7% in June quarter compared to 22.3% Q1, but increased from 20.8% in June quarter of previous fiscal. Further analysis of the data showed that FIIs increased ownership in 52% of Nifty 500 companies but 54% of Nifty companies.

Fear of rising virus cases during the second wave in India had spooked FIIs leading to massive sell-off of foreign funds in April. FIIs were net sellers of India equities worth $1.48 billion in April, first sell-off in the year, resulting into a total inflow of mere $757.72 million in June quarter.

In June quarter, Nifty had jumped 7% while Nifty 500 was up over 9% while Nifty Bank rallied over 4%.

Sectorwise, FIIs are significantly overweight in private banks/ non-banking financial companies (NBFCs) and underweight in consumer, capital goods, metals, healthcare and PSU banks.

“Financials has had a dominant run over the past few years. However, BFSI’s (private banks, NBFCs, insurance, and PSU banks) underperformance has continued to reflect in the FII allocation – down to 38% in the Nifty-500 as of June, from 45.1% in December 2019 and 40% in March 2020. This has resulted in the trimming of weight by 130 bps q-o-q (quarter-on-quarter)," said Gautam Duggad, head of research - Institutional Equities, Motilal Oswal Financial Services Ltd.

Tata Steel, Tata Motors, Cipla, NTPC, M&M, Axis Bank, and IndusInd Bank were the top stocks to see an increase of more than 1% in FII holdings on a sequential basis. SBI Life Insurance, Hero MotoCorp, Adani Ports, Tech Mahindra, BPCL, Kotak Mahindra Bank, and ITC were the top stocks to see declines in FII holdings by more than 1% on a q-o-q basis.

“While the near-term indicators are looking a little stretched for equities, the medium-term outlook for Indian equities remains attractive. We continue to expect some profit-booking especially by the foreign investors. While the June quarter earnings could be weak, the focus would shift to the outlook post June quarter results, which looks positive supported by the reopening of the economy. We continue to prefer mid-caps over large caps, albeit with a lower conviction now," Credit Suisse Wealth Management, India said in a note on 22 July.

The FII-DII ownership ratio in the Nifty500 declined marginally to 1.5 times in Q1FY22 from 1.6 times in the previous quarter. Overall, the top five sectoral holdings of DIIs in the Nifty500 account for 65% of the total allocation – BFSI (27.4%), technology (11.8%), oil & gas (9.8%), consumer (9.7%), and healthcare (6.3%).

There is a mixed trend in promoter holdings—an increase of 50bps q-o-q, down 50 bp year-on-year, data showed. Promoter stake in Coforge, Indian Bank, Union Bank, Crompton Greaves Consumer, TVS Motor, and HDFC Life Insurance declined on account of stake sales and capital raising exercises. Conversely, United Breweries, Vedanta, and Tata Motors posted an increase in promoter stake q-o-q.

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