Software, textiles and auto sectors find favour; domestic investors book profits

Foreign institutional investors (FIIs) were at odds with domestic institutions in their stock market moves for the quarter ended December 2013.

As the markets zipped back to their 2008 highs, insurance companies and domestic investors played it safe and reduced their holdings in stocks and sectors that had a good run.

But FIIs were quite bullish, hiking their stakes in as many as 187 of the stocks that make up the CNX 500 index.

The surprise jump in India Inc’s profits in the September quarter, the stability in the rupee and expectations that global recovery will help Indian exporters, seem to have driven FII stock and sector choices in recent months. FIIs accumulated shares in sectors such as software, textiles, media and automobiles, instead of the defensive consumer and pharma companies they preferred earlier.

These were trends from the 338 companies in the CNX 500 index that have declared their shareholding patterns for December 31, 2013.

FII fancies

With foreign investors taking note of India’s rising export competitiveness, software stocks were snapped up by FIIs. Mid-size IT firms such as NIIT Tech, Persistent Systems, Polaris Financial and Tech Mahindra, all saw FIIs raise their stakes by 3-8 percentage points.

With FMCG and pharma sectors becoming expensive, FIIs raised their holdings in media stocks in the December quarter. PVR and Zee Entertainment saw a jump in FII holdings. Mutual funds did the exact opposite, reducing holdings by more than a percentage point in the two stocks. The stock of PVR has more than doubled in the past one year, while Zee’s 25 per cent return in 2013 was far ahead of the 9 per cent clocked by the broader market.

FIIs also raised stakes in auto and related sectors, accumulating Motherson Sumi and Amara Raja Batteries, which domestic institutions sold. FIIs did not raise their bets much on FMCG and pharma stocks either.

Betting on a revival

Where both foreign and domestic institutions have trodden a similar path is in betting on a revival in subdued sectors such as infrastructure, textiles and mining. Several capital goods stocks have also seen more institutional participation.

For instance, Adani Ports, Gujarat Pipavav and GMR Infra in the infrastructure space have seen stake raises by both FIIs and mutual funds. Similarly, NMDC, Raymond and SRF were the common preferences of both. ABB, Crompton Greaves, Cummins India and TD Power Systems also saw institutional holding inch up.

Shedding stake

Insurance companies were on a selling spree, reducing stakes in 110 companies while increasing them in barely 36. They brought down their overall holding in the market to 6 per cent by December-end. FIIs, on the other hand, ended up holding 20.2 per cent of the outstanding market cap of the CNX 500 companies.

(This article was published on January 19, 2014)
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