Lack of investment options drive FIIs, DIIs to seek it as safe haven

The overall lacklustre markets notwithstanding, Foreign Institutional Investors (FII) are primarily betting on large caps in the FMCG sector while Domestic Institutional Investors (DII) are positive on the mid-caps.

According to a report on ownership trends in FMCG sector by A.C. Choksi Share Brokers, only five of the 16 large FMCG companies have witnessed a decline in their FII holding in the April-June quarter over the preceding January-March quarter. Domestic institutional investors, on the other hand, raised their holdings in seven companies and reduced stake in the remaining nine during the March quarter.

FMCG sector analyst, Angel Broking, V. Srinivasan said: “While FIIs typically follow a top-down approach and go for large-cap stocks in the countries they decide to zero in on, DIIs on the other hand view large caps as overvalued and look to invest in mid-caps instead.”

“The FMCG stocks are still overvalued being defensive in nature but owing to a slow down in the economy and lack of alternative investment options, investors still find the sector as a safe investment,” he added.

The FII holding in Britannia, Jyothy Laboratories, Hindustan Unilever and Godrej Consumer Products increased by more than a percentage point. However, they reduced ownership in United Spirits, GSK Consumer Healthcare, Dabur, Emami and Nestle in the quarter.

Besides, FIIs increased stakes in ITC, Marico, Bajaj Corp, Colgate, Zydus Wellness, Asian Paints, Berger Paints during the June quarter.

Overall, FIIs stayed away from the Indian equity market in the April-June quarter and pulled out Rs 1,957 crore after making a net investment of nearly Rs 44,000 crore in the preceding quarter (January-March).

(This article was published on August 10, 2012)
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