FIIs increased stake in 3 out of 5 BSE 200 companies

Foreign institutional investors (FIIs), who have poured in record inflows into Indian markets last year, have increased their shareholding in 3 out of 5 companies listed on Bombay Stock Exchange’s BSE 200 index.

Out of 112 companies that have declared their shareholding pattern for the quarter ended December 31 so far, 66 have seen an increase in FII stakes.

This is the fourth consecutive quarter where foreign investors have raised stake in Indian companies.

Consequently, their average ownership in these 112 companies rose by 42 basis points (bps; a hundred bps makes a percentage point) over September quarter figures to 17.20%, and by 187 bps.

Backed by high liquidity, FIIs continued to chase returns in India as the country is expected to clock 8.5-9% growth in fiscal 2011.

Interestingly, a third of the total FII inflows of Rs136,200.67 crore in 2010 came in the October-December quarter during which, the markets, after almost touching all-time highs, ended up with a gain of just 1% over the July-September quarter.

India has been the best performing of the top 10 largest markets in the world in 2010, data from Bloomberg show.

The companies that have witnessed huge buying interest by FIIs in the last quarter include PowerGrid Corporation, India Infoline, Zee Entertainment and Voltas, where they increased their stake sequentially by 10.59%, 5.92%, 5.22% and 3.35%, respectively.

On the other hand, the companies where FIIs reduced their stake the most included JSW Steel (3.46%), Apollo Tyres (3.16%) and Sesa Goa (2.20%).

Among the other category of investors, domestic institutional investors such as mutual funds and insurance companies along with promoters continued their selling spree for the third consecutive quarter, booking some profits.

While domestic investors reduced their stake by 42 bps over the July-September quarter and by 121 bps year on year last year to 10.50%, promoters shed their stake by 17 bps sequentially and by 98 bps on a year on year basis to 54.98%.

Mutual funds were net sellers of equities worth Rs3,875 crore during the quarter.

Retail investors more or less maintained their stake - their shareholding rose just 3 bps sequentially.

Data available for first 13 days of the current quarter seems to be suggesting a reversal in trend.

Foreign institutional investors have been net sellers by Rs2,487 crore so far in the current quarter, while mutual funds have bought shares worth Rs417 crore. However, analysts do not see any major reversal as such.

“It is not expected that FIIs would be selling any significant stake at least in the core companies. Valuations have become more attractive after the correction and global liquidity remains high. There is still some hope of buying interest returning in the remainder of January itself,” said Naveen Fernandes, head-institutional broking at KR Choksey Shares and Securities.

Mehraboon Irani - principal and head - private client group business at Nirmal Bang Securities, said with macro factors having turned negative in recent few weeks, there is nervousness.

“At the moment, investors are worried about inflation, rising interest rates, high crude prices and widening current account deficit. Though exchange-traded funds and hedge funds appear to be selling, long-only funds are staying put. India being the second-fastest growing economy would continue to see FII inflows once things get clearer after crucial events such as the Reserve Bank of India monetary policy review meet later this month and then the Union Budget next month,” Irani said.