The Hindu Business Line : FIIs keep faith in mid-caps

BL Research Bureau If all the talk of “rising risk aversion” over the past year has led you to believe that foreign institutional investors (FIIs) have fled mid-cap stocks, think again. Tracking changes in the shareholding pattern of stocks in the CNX Midcap Index over the past two years reveals that FII appetite for India’s emerging businesses has only increased.

Mid-cap stocks have been through a tumultuous phase over the past two years, trailing behind large-caps between October 2005 and June 2006, but catching up swiftly in recent months. While retail investors may have moved in and out of these stocks over the past couple of years, FIIs appear to have retained faith in the mid-cap story. Between June 2005 and March 2007, the average FII holding in the 100 stocks constituting the CNX Midcap Index has increased to 15 per cent from 11 per cent. FIIs have continued to buy mid-caps even in the turbulent phase of the past year. Since June 2006, FIIs have increased their stake in 42 stocks, even as they retained their stakes in 33.

Sector preferences

While FII interest in mid-cap stocks has remained undiminished, they have made a visible shift in their sector preferences. Banking and FMCG stocks in the mid-cap space have been the key favourites for FIIs in recent times.

Over the past year, FIIs have lapped up mid-cap banking stocks, with Andhra Bank, Bank of Maharashtra, Allahabad Bank and J&K Bank witnessing a significant ramp-up in FII holdings between June 2006 and March 2007. Other finance stocks such as Indiabulls Financial Services and IDFC were also popular with foreign investors.

Consumer stocks also appear to have whetted FII appetite as they increased their stake in United Spirits, Marico Industries, Colgate Palmolive and Britannia. They were more selective within the pharmaceutical space, increasing holdings in Glenmark Pharmaceuticals, Aurobindo Pharma and Lupin, while paring them in the stocks of Matrix Labs, Aventis Pharma and Divis Labs.

Arvind Mills, LIC Housing Finance and hotel stocks – EIH and Hotel Leelaventure – were among the 25 stocks that saw a cut in FII holdings since June 2006.

Deepen positions

Even as they ventured into new businesses that caught their fancy, foreign investors continued to deepen positions in stocks that were already in their portfolio. FII holdings in stocks such as Gammon India, United Spirits, Apollo Hospitals, Financial Technologies, India Cements, Indiabulls and CESC have steadily increased over the past two years. Close to 45 stocks in the CNX Midcap Index feature an FII holding of more than 15 per cent. There were only 27 such stocks a year ago.

More Stories on : Foreign Institutional Investors | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Mumbai is not rained out just yet

Top 10 cos raise $3.1 billion through FCCBs

Honda’s small car won’t come cheap

Affluent Indians ready to splurge on realty abroad

Sensex, Nifty may touch new peaks

FIIs keep faith in mid-caps

PE firms more interested in buyouts