Investors prefer cos with light balance sheet, low debt level

PTI Mumbai | Updated on August 28, 2012

FIIs have infused a net investment of Rs 59,014 crore so far this year in equities.

Asset heavy companies with high leverage may continue to generate less interest among investors in the equity market till interest costs come down, a top company official of ICICI Securities said.

“Asset heavy companies with high leverage (where debt level is high) are not witnessing much interest from investors and rightly so due to higher interest rate regime, which impacts the bottom line of those companies,” ICICI Securities Managing Director and Chief Executive Anup Bagchi told PTI.

Generally, manufacturing companies like the steel and aluminium sector are asset heavy.

This trend is likely to continue till the interest costs go down, which is linked to inflation, Bagchi said.

About investment strategy in the current market, he said investors prefer light balance sheet with low debt in this market.

“Light balance sheet with low debt level is preferred companies at this point of time,” he said.

Sensex is presently hovering around 17,650 level with renewed interest from FIIs, which had pumped in around Rs 6,800 crore into domestic equities in August 1—24 period.

From the beginning of this year, FIIs have infused a net amount of Rs 59,014 crore so far this year into equities and Rs 25,303 crore in debt market.

“Yes, FIIs are investing mostly through the ETF (exchange traded fund) route and expectation of reforms,” Bagchi said, adding that the index is not a homogeneous set of stocks.

Published on August 28, 2012

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