The Hindu Business Line : FII holding in 82 BSE-500 stocks dips in Q1

Foreign institutional investors (FIIs) have reduced their shareholding in 82 of the BSE-500 stocks, out of the 118 companies the data for which is available in the first quarter of this fiscal.

In stocks such as Mahindra Gesco and Jindal Saw they had reduced their stake by more than 13 percentage points.

According to Mr Deven Choksey of K R Choksey, the FIIs were selling out of compulsion and not conviction.

Obviously, FIIs were net sellers to the tune of Rs 6,239.80 crore cumulatively in these three months. The entire FII selling of Rs 8,247.20 crore came in May when the Sensex had peaked at 12612.38 points on May 10. They were net buyers in April (Rs 589.20 crore) and June (1,418.20 crore). Interestingly, the selling in May stood out as a record of sorts for highest FII selling in a month since January 1999.

However, India was not the only country singled out for dumping stocks in these three months. According to Mr Deven Choksey and Investment Advisor, Mr S.P. Tulsian, all the emerging markets came under the FII hammer in this quarter.

"As I understand, FIIs have been selling across the emerging markets in the last three months. They have done this out of compulsion and not conviction," Mr Choksey said.

And what exactly are these compulsions? Soaring crude prices, tightening interest rates in the US and now Asia including Japan after a hiatus of six years, and a depreciating rupee that erodes the dollar-denominated returns of FIIs in India, he explained.

The data was compiled for 118 stocks for which FII shareholding pattern was available for the quarter that ended in June 2006.

FIIs sold heavily in companies such as Mahindra Gesco, Jindal Saw, J K Industries, EMCO, KPIT Cummins, Gujarat Fluorochemicals and AIA Engineering where their total stake was more than five percentage points in the second quarter of this calendar year.

While FIIs had reduced their holdings in 48 of these companies by over one percentage point, , in the remaining 34 companies, thereduction was miniscule. Interestingly, during the same period when the markets hit their historic highs and climbed down sharply thereafter, FIIs increased stakes in 19 companies by over one percentage point.

Of the five Sensex stocks for which data was available, only Wipro had seen a gain in FII shareholding of a miniscule 0.01 percentage point. The losers were L&T (3.36 percentage points), Infosys (2.47 percentage points), BHEL (1.16 percentage points), HDFC (0.68 percentage point) and HDFC Bank (0.16 percentage point).

"In May, FIIs moved out of all the emerging markets. However, India fared better in as much as the fact that withdrawals in other emerging markets had been sharper compared to India. Since the market was at its peak in May when negative sentiments started emanating, the sell off in that month was the highest," Mr Tulsian emphasised.

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