Given that 40% of the free float shares are held by foreign institutional investors (FIIs), this category of investors highly influences the market. And considering FIIs sold nearly US$ 2.6 billion (net) worth of shares in the quarter ended September 2015 (the most since 2008) - a period in which the BSE-500 index fluctuated between 11,386 and 9,990 points in a matter of weeks - it gives an indication of how they can influence stock price movements in the short term.
When it comes to sectors, it seems that the PSU banking stocks are being less favoured by this category of investors. FIIs are believed to have trimmed down stake in the major PSU banks in the range of 50 to as much as 500 basis points in a matter of one year. As reported by the Mint, the sharpest decline was seen in Andhra Bank (494 basis points), Bank of Baroda (491) and Punjab National Bank (440 basis points). As the business daily points out, the lack of improvement in NPAs is the key reason for investors' losing faith in such stocks.
Vivek Kaul, the India Editor of the Daily Reckoning, had recently pointed out the two key issues that are lurking in this area. First being the high proportion of restructured loans becoming bad loans; second being the strong need for capitalisation, which the government may find difficult to do. In short, a comprehensive plan is required to solve the mess in the Indian public sector banking space.