Foreign institutional investors (FIIs) continued to increase stake in Indian companies for the fifth consecutive quarter in July-September, taking their holding in BSE 500 companies to a new high.
FIIs, which own a little under 45% of the entire free float in the Indian markets, have raised their stake in 123 out of the 240 BSE 500 companies that have declared shareholding patterns for the September quarter.
As a result, their average stake in these 240 companies has inched up to 14.70% from 14.65% in the June quarter.
The increase has been small compared with the last few quarters. To be sure, FIIs were net buyers of equities worth just Rs 524 crore in the September quarter. They were buyers in information technology, pharmaceutical, cement and media stocks and sellers in banking and consumer stocks.
Stocks that saw the highest rise in FII stake included Religare Enterprises (up 8.78% on-quarter), HDIL (up 5.18%), Mindtree (up 4.66%), Info Edge (up 3.62%) and Zydus Wellness (2.79%).
Domestic institutional investors (DIIs), on the other hand, continued to reduce stake in BSE 500 companies for the fourth consecutive quarter to take their average holding to a 12-quarter low.
DIIs, which were net sellers of equities worth Rs 4,386 crore in September quarter, pared stake in 137 companies while increasing their shareholding in 85. As a result, their average holding reduced from 8.52% as at June-end to 8.24% at the end of September.
DIIs were big sellers of pharma and IT stocks, but increased stake in beaten down mid-cap infra stocks and large-cap banks.
Among other classes, retail investors increased their average stakes in BSE 500 companies to 12.97% from 12.89% quarter on quarter, while promoters, too, increased their stakes from an average of 55.25% to 55.43%.
The increase in promoter stake may be attributed to a few key buybacks like Crisil and Hindustan Unilever, which came out with open offers to raise their stake to a maximum of 75%. The promoter shareholding in both these cases has now gone above 67%.
Going ahead, experts believe that the trend in FII shareholding would be largely determined by global events, besides domestic factors like fiscal discipline and the upcoming elections.
Ajay Bodke. Head - investment strategy & advisory at Prabhudas Lilladher, believes that while foreign flows have definitely improved in October post deferment of quantitative easing and the RBI’s measures to contain rupee volatility, the trend, going forward, remains uncertain due to key global events like the US economic recovery, which could prompt the Fed to start tapering early.