The Hindu Business Line : FIIs continue to exit bank stocks

FOREIGN institutional investors continue to sell banking and select PSU stocks even though panic sell-off triggered by shock election results has eased. The popularity of bank stocks has clearly sagged after the new coalition Government vowed to keep banks and globally competitive PSUs within the public domain.

"It is pretty obvious that foreign investors are selling banks (stocks) as FII limits in many banks have opened up over the past few weeks," said a dealer with a private sector bank. The RBI recently said that FIIs could purchase shares of Oriental Bank of Commerce, Bank of Baroda, ICICI Bank and Centurion Bank because the FII holding in them have fallen below their individual ceiling. A dealer with a large institutional broking firm said hedge funds and absolute return funds were continuously selling from their holdings of bank and PSU shares every time the prices improve. Immediately after election results were announced, several top foreign brokerages had downgraded India and advised their clients to cut exposure. "We believe FIIs remain by and large overweight on India and any country-specific negative news could see some reduction in their positions," broking firm UBS had said after the elections.

Merrill Lynch had said that near-term policy disappointments could accelerate selling that has been modest. "Valuations are not compelling enough given the outlook for the risk premium and India remains a consensus overweight among international investors. It is time to cut exposures to India," Merrill had said in a late May report.

The first casualties of the negative sentiment were shares of state-owned banks and companies. FIIs were net sellers of equities worth $737 million in May after being remaining net buyers every month for over a year. However, they have invested a net $127 million so far this month.

Some analysts believe FIIs are churning their portfolios. "There seems to be a lot of portfolio churning happening in bank and PSU stocks. Even though FIIs appear to have exited from several stocks, they continue to buy select scrips," said a top broker.

Mr Sushil Choksey, Director at Rosy Blue Securities, believes that the Indian equity market has not yet been tested by large-scale selling. "Currently volumes are thin and sharp traders are making money because both buy and sell sides are hollow," he said. A large-scale sell-off could yet happen if Budget depresses sentiment, he added.

A dealer with another institutional broking firm said FIIs have unloaded shares of Union Bank, Canara Bank, OBC, PNB and Vijaya Bank, Bharat Heavy Electricals, Bharat Electronics, HPCL, BPCL, IOC and ONGC in large quantities. Ebullient foreign investors had hoarded bank shares last year after the previous Government promised a slew of reforms, including higher foreign ownership, in the Indian banking sector. That may not happen now with the new dispensation in New Delhi preferring to keep the restrictions on foreign ownership in Indian banks.

More Stories on : Foreign Institutional Investors | Stocks | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
MFs start looking beyond metros

Petro pricing: PM to be briefed today

Global edible oil prices crash; farmers may switch crops

FIIs continue to exit bank stocks

Music in offices, discos comes at a price