The Hindu Business Line : P-Note controversy fails to dampen FIIs’ sentiment

Mumbai, Jan. 25 The Participatory Note controversy has failed to dampen FII sentiment for the Indian stocks, if details of shareholding by them in bluechip stocks are anything to go by.

The number of FIIs holding shares in the 50 companies that constitute the benchmark index of the National Stock Exchange (NSE) has gone up by roughly 10 per cent between close of September 2007 and December 2007.

Fresh investors

The number of investors in these companies had moved up from 13,756 to 15,021. In terms of the percentage of holdings to the total paid-up capital in these companies, the figure hasn’t shown much of a change.

It has moved up marginally from 17.26 to 17.38 per cent between these two periods. Analysts say that this figure doesn’t say much, but what it does signify is that there is investment by new players.

Explaining the phenomenon of stagnation in ownership, even as the number of FIIs have gone up, Ms Shahina Mukadam, Head of Research, IDBI Capital Market Service Ltd, said: “FIIs that have invested in India for a long time have booked their profits as the country has given them substantial amount of returns even as fresh investors have come on board. The investors, who after the whole P-Note controversy emerged, have taken the route of registering themselves as FIIs and that has increased this number.”

As regards the future direction of foreign money into the Indian stock market, one analyst is of the view that two factors are at work here. “When the interest rates are cut, money generally flows out of the fixed income securities and typically put into equity markets. The equity markets as a whole are the beneficiaries,” explained Mr Nitin A. Khandkar, Senior Vice-President, Research, Keynote Capitals Ltd.

Profitable positions

“But the sub-prime issue would also mean that these investors in order to recoup losses they made elsewhere would be selling off their profitable positions. That would include not just investments in India but their positions in all of the emerging markets to make up their losses,” he added.

The ownership stake held by FIIs in TCS has increased by 2.54 per cent, wherein September 2007 the number of foreign investors in the company was 282 and by December this number had jumped to 324. Sterlite too saw an increase in the number of foreign investors by 1.47 per cent.

In September, 2007 there were 156 and by December 2007 this number increased to 235 foreign investors. Companies that saw a dip in the stake held by FIIs include Ambuja Cements (4.12 per cent), Ranbaxy (1.57 per cent), Reliance (1.92 per cent) and Cipla (1.81 per cent).

Overall, the figures show that the stake held by FIIs in the frontline stocks has been more or less stable even though in the month of October the issue of the Participatory Notes was alive.

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