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FII: Change in ownership

May 5, 2009

FIIs have poured money in the Indian stock markets by the truckloads over the past few weeks. But has it arrested the trend of their falling ownership stakes in companies? In this article, we give an insight into how their holdings in Sensex companies have changed since March 2008 over different time periods.

Change in FII holding as on March 2009
Sector* YoY change Change since September 2008 QoQ change
Cement -10.5% 15.6% 11.3%
Engineering -16.6% -7.6% -2.6%
Telecom -19.5% -12.2% -6.1%
Realty -17.5% -8.0% -8.9%
Financial institutes -7.6% -5.1% -3.2%
Metals -27.7% -23.2% 0.8%
FMCG -4.0% 2.0% -2.6%
Software 2.8% 1.9% 3.0%
Auto -13.0% -8.4% 6.0%
Power -14.4% -7.7% -7.4%
Pharma -45.1% -26.3% -11.5%
Oil and gas -15.9% -8.3% 1.4%
Misc -1.8% 15.9% 11.4%
Source: Prowess
*BSE Sensex

As seen from the table, FII's have been sellers during the last one year (March 08 to March 09) across sectors, except software. The second lowest losers were the FMCG companies. Pharma sector was the major loser on account of Ranbaxy, which witnessed massive sell off by FIIs. With US FDA alleging Ranbaxy of forging crucial data inorder to secure approval for its products and selling substandard drugs in the US, Ranbaxy's stock lost all its sheen with FII's stake reducing from 18% last March to 3% currently. Metal stocks were not far behind their pharma peers, with FII's reducing their stake by 28% YoY. Reduced demand and huge leveraged buyouts by private sector companies led to the low holding.

Comparing the FII holding in quarter ended September 2008 with quarter March 2009, stocks from the cement and FMCG sectors and specific names like Jaiprakash Associates and Sterlite Industries (miscellaneous) found favour with FIIs. Long term prospects of the cement sector owing to the need to build up infrastructure to boost economic growth and unfulfilled demand for dwelling units coupled with attractive valuations led to the buying. FMCG stocks also emerged as favourites due to robust demand, pricing power and strong return ratios. Though FII holding in software stocks remained positive, they lost some sheen on account of the Satyam debacle and lower IT spends by corporate on account of slowdown and currency volatility.

Moving onto changes in ownership vis-a-vis the December quarter, buying was seen in cement, metals, software, auto, oil and gas and miscellaneous stocks. Pick up in auto sales, excise benefits and lower interest rates led to better times for auto companies. Higher valuations and cautious outlook led to some selloff in FMCG stocks.

Pharma, power, telecom, engineering, financial institutes and realty stocks however are not yet in the buying radar of FIIs. Though some buying is taking place, the percentage is still lower than last year. Huge capex plans, low demand, huge debt levels and economic slowdown continue to play spoilsport for these sectors. Low growth in advances and loans and higher NPAs are affecting the performance of financial institutions.

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