The rush to buy has begun with foreigner institutional investors have so far pumped in Rs 7,900 crores in Indian equities since the start of the year — quite a dramatic change of mood amongst them — who may have begun to believe that there could finally be a turnaround in the economy this year.
Some smart investors, in anticipation of rising share prices, had already begun upping their stakes since the previous quarter.
A Firstpost analysis found out that of the 30 companies that constitute the Sensex, 17 saw an increase in foreign shareholdings for the December quarter. Reuters
A Firstpost analysis found out that of the 30 companies that constitute the Sensex, 17 (more than half) saw an increase in foreign shareholdings for the December quarter. (see Table 1 below)
Tata Motors was the biggest gainer in that respect: foreign shareholders raised their stake to 24.14 percent in the quarter ending December, up 2.26 percentage points from the previous quarter.
Defensive shares like ITC and Hindustan Unilever also benefited from foreign investor interest — their stake was up by about 1 percentage point each.
In tough economic times, most investors prefer holdings stocks of consumer goods companies, which are usually seen as “recession proof”.
“During the December-ending quarter, there were lots of concerns about India’s growth and inflation, so the investors started to exit out of the high beta (high volatile) sectors and moved into stable stocks like ITC,” said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities.
IT shares Wipro and TCS also reported gains in foreign shareholding, perhaps in anticipation of the extra boost to earnings that these companies would get because of the recent rupee depreciation.
However, there was a fair share of sell-offs by foreign investors as well: ICICI bank was the biggest loser as foreign investors pared their holdings to 34.74 percent in the December ending quarter from 38.17 percent earlier (see Table 2 below). Construction major Larsen & Tubro also reported a 2.1 percent drop in foreign investor holdings. Investors also turned away from metal companies Tata Steel and Hindalco, which posted a decline in foreign shareholdings of around 1.7 percent.
On the domestic front, mutual funds increased their holdings in 13 companies while offloading their stakes in 16 companies.
DLF was the only company in which there was no change in domestic institutional shareholding.
This year, there could be renewed interest from foreigners as the economy picks up and the fall in earnings growth and margins bottom out.
Table 1: Increase in FII stake
Table 2: Decrease in FII stake
