The Hindu Business Line : Differing perceptions in steel stock investments

Chennai, Oct. 6 Foreign institutional investors (FIIs) raised their stakes in most of the steel companies while individual investors sold a substantial chunk of their holdings in the big steel companies in January-June 2007.

Individual investors, particularly the small shareholders having less than Rs 1 lakh investments, have sold heavily booking profits.

According to analysts, this trend is an outcome of difference of perceptions between the two groups of investors, one is the retail segment and the other is institutional buyers.

FII holding in Steel Authority of India has gone up from 5.6 per cent in the beginning of January to 6.39 per cent by June-end during which the holding of individuals has come down from 2.28 per cent to 1.89 per cent.

Similarly, in the case of Tata Steel, the FII holding has gone up from 18.11 per cent to 22.65 per cent during January-June, while individual holding has come down from 24.74 per cent to 22.2 per cent.

In Jindal South West too, the FIIs have raised their stakes from 18.21 per cent to 21.17 per cent during the first six months while individual holding has come down from 13.89 per cent to 11.51 per cent.

Exception

However, an exception is Essar Steel where FII holding remained static at 2.04 per cent throughout the six months while there had been a marginal increase of 0.01 per cent in the case of Ispat Industries.

Individual holding has come down in both these companies. Interestingly, while all the small shareholders have been consistent in selling, large individual shareholders have raised their stakes in Essar in tandem with mutual funds and also in Ispat Industries where corporate bodies too have raised their stake.

According to Mr P.K. Choudhury, Managing Director of credit rating agency ICRA Ltd, :“the small investors have exited at what they thought was the right price and many of them had actually purchased the shares at the time of public issue.”

“On the other hand the institutions, who buy the shares after proper analysis of the economic fundamentals, are still seeing better prospect for the Indian steel industry. The difference of perception is because the retail investors have opted for short-term gains while the institutions have taken their stand for the medium-term,” Mr Choudhury said.

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