Domestic institutional investors turned their backs to stocks of frontline IT companies, even as their overseas counterparts went on a buying spree last fiscal.
Shareholding data of the Bombay Stock Exchange show Indian investors pared their exposure to Tata Consultancy Services, Infosys, Wipro and Cognizant Technology Solutions by about 70 to 295 basis points during the 12 months ended March 31, 2013.
On the other hand, foreign institutional investors hiked stake in these companies by 70 to 435 basis points (See Table).
“Since the second half of last year to early this year, the upswing in the markets has been driven by FII buying. Indian domestic investors generally prefer to buy equities when they are cheap and sell them when FIIs are taking buying positions,” said Alok Shende, founder director and principal analyst of Ascentius Consulting.
Some analysts attribute this trend to the waning interest among domestic institutional investors (DIIs) towards equity and the growing perception among FIIs that the IT sector is a safe bet for investments in the backdrop of choppy global markets over the last one year.
“Domestic players have been selling across the board of late.
Other assets
Over the last five years, Indian investors have developed a preference to park funds in other asset classes such as gold and real estate since their return on equity has been modest,” said Guarav Dua, Head of research with Sharekhan Securities.
Jagannathan Thunuguntla, strategist and head of research at brokerage firm SMC Global Securities, says that FIIs increasingly view the IT sector as a ‘defensive’ bet, much like the FMCG and pharmaceuticals sectors.
“In the last two years, shares of Indian IT sector companies (both large and mid-cap listed) were range-bound despite challenges in the global economy. So, FIIs perceive investments in these companies to be stable when global cues are down,” he said.
Maximum institutional activity during the year was seen in the case of Noida-based HCL Technologies.
FII's upped stake in the company (HCL) by 435 basis points while DIIs reduced exposure by 295 basis points. TCS saw a 126 basis points change in FII holding while DII reduced stake by 151 basis points
The Indian IT industry is going through an interesting phase in which two of the largest players, Tata Consultancy Services and Cognizant Technology Solutions, have painted an optimistic picture for the future, while rivals Infosys and Wipro are more cautious in their guidance.