FIIs increase holdings in Indian companies
Foreign investors are on an aggressive buying mode in Indian markets; park a record $28 billion so far this year
BY Siddharth Kumar
Confirming the trend of rising investment in the Indian stock market, foreign institutional investors (FIIs) increased their holdings in about 500 companies during the September quarter, up 7 per cent in comparison to the first quarter of the current fiscal.
An analysis of the shareholding pattern of listed companies shows that FIIs, key drivers of domestic stock market, raised their stake in 497 companies in the second quarter. Of these, more than 300 entities witnessed a price rise. According to a study by broking house CNI Research Ltd, overseas investors had invested in 463 companies in the April-June quarter.
Foreign fund houses are on an aggressive buying mode in local markets for the past few months and have parked in a record $28 billion (Rs 1.27 lakh crore) so far this year, according to data released by the Securities and Exchange Board of India (SEBI). The increasing grip of overseas capital over Indian companies holds significant value as most of these cherry-picked stocks usually trend upward on the bourses.
“We have seen 73 per cent cases of price rise when the FII stake rose by less than or equal to 2 per cent in one quarter. Where the FII stake rose between 2 per cent and 5 per cent, the rise was 81 per cent. In a 10 per cent stake increase scenario, the price rise was 80 per cent and where the stake increased over 10 per cent, the price rise was seen at 66 per cent,” said Kishore P Ostwal, chairman and managing director of CNI Research. The financial sector was the favourite pick during the quarter under review, and blue-chips like the State Bank of India (SBI), Housing Development Finance Corporation Ltd (HDFC), HDFC Bank Ltd, ICICI Bank Ltd and Axis Bank Ltd saw more increased holding by overseas buyers. Thanks to persistent shopping by FIIs, many stocks including those of HDFC and SBI have touched record levels.
Huge FII inflows were also behind the steady rise of the Sensex, the bellwether index of the Bombay Stock Exchange. The 30-share index touched a record closing level of 21,000 points earlier this month.
“Low interest rates in developed economies and better prospects of returns from emerging markets like India and China are attracting hot money here,” said Avinash Gupta, vice president (equities) at Bonanza Portfolio Ltd.
Billionaire Mukesh Ambani-led Reliance Industries Ltd, India’s most valued listed company, too witnessed a rise of 0.31 per cent in FII holdings. The Anil Ambani-promoted Reliance Communications Ltd, Reliance MediaWorks Ltd, Reliance Capital Ltd and Reliance Infrastructure Ltd too saw a similar trend.
Increase in equity holding by foreign fund houses, however, does not necessarily mean a reduction of stake by promoters of the company. “Most of these shares are bought through open market transactions not from promoters of the company,” added Ostwal. With an increase of 14.32 per cent in shareholding by FIIs, REI Agro Ltd can be termed as a hot pick by foreign investors.