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Foreign institutional investors continued to buy into Indian stocks in December quarter even as domestic mutual funds remained on sell mode.
Six out of 10 companies in the BSE's top-500 saw an increase in the FII stake during the December quarter over the September quarter.
Over 400 companies have disclosed their December shareholding pattern with the stock exchanges.
FIIs have hiked stake in 250 companies and reduced it in 150. On an average, the FII stake has gone up by one percentage point during the quarter.
Foreign funds have invested a record $29 billion in 2010 in equity markets, of which more than a third (about $10 billion) came in the December quarter.
Mutual funds, on the other hand, were net sellers by Rs 27,867 crore in 2010 and Rs 4,524 crore in the December quarter.
During the three-month period ended December, the BSE Sensex gained 2.3 per cent.
“MSCI India's current forward P/E multiple of around 17x [multiple] is lower than the end-August 2007 level of about 18x, and significantly lower than the peak of 23-24x reached in January 2008. As such, an acceleration in foreign flows could lead to a further expansion in valuations,” according to a RBS report, released in September.
The analysis reveals that instead of adopting sector-specific strategy, the FIIs have picked stocks across-the-board in the universe of mid- and small-cap companies.
Other players
Promoters' stakes remained stable with 250 companies reporting no change in their holding, while there has been an increase in 60 and decrease in 99 companies.
Small retail investors — individual shareholders holding nominal share capital up to Rs 1 lakh — seemed to have indulged in cherry-picking in underpriced stocks, taking advantage of a slide in the mid- and small-cap stocks in November. They have increased stakes in 214 companies while decreased holdings in 196.
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