The Hindu Business Line : It’s not selling alone for FIIs

Although a majority of companies in the BSE-500 index companies saw a fall in FII shareholding, at least every third stock saw a hike too. This was despite the Securities and Exchange Board of India data showing FIIs have pulled out a massive $13 billion from the Indian market so far in 2008.

Of the BSE-500, 463 companies have disclosed their shareholding pattern for the September quarter. Of these, 193 have witnessed a hike in FII shareholding while 259 companies saw a reduction.

Interestingly, the hike in stake has been across sectors and in companies belonging to various index segments (large-, mid- & small-cap).

Some of the companies that saw a hike in FII holding are Vijaya Bank, Kirloskar Oil Engine, India Cements, United Spirits, Bharat Bijlee, Berger Paints, Tata Chemicals, Emco, Mahindra LifeSpace, EIH, Gateway Distriparks and HDIL.

Conversion of preferential allotment of warrants into equities during the quarter, picking up stake through open offers, and churning of portfolios are some of the reasons for the hike, according to brokers.

Tough year

BNP Paribas, in its Alpha Strategy report September 2008, said: “The market likely to suffer the most from a withdrawal of liquidity is India. The economy has a current account and investment deficit. Plugging this gap was not a problem during the go-go years of 2003-07; however, 2008-09 will be far more challenging in terms of access to funding and it is better to be a lender than a borrower in such an environment.

“Policymakers urgently need to slash interest rates to prevent a sharp downturn in growth, putting aside concerns about inflation.”

Non-US shift

According to Mr Gul Teckchandani, Equity Strategist, FIIs had held $218 billion worth equities in January, which have whittled down to $60 billion currently due to value erosion (in stock prices) and a massive exit by them. But those FIIs that preferred to stay have churned their portfolios, identifying value picks that could have pushed up the stake in some of the companies.

Brokers also said that while some US-based financial institutions have been offloading Indian equities, a large proportion of what they were offloading had been picked up by non-US-based financial institutions resulting in overall increase in FII stake in some of the companies.

Companies such as Ranbaxy, Dabur Pharma, Gujarat NRE Coke, Aptech, Hindustan Oil Exploration, Development Corporation Bank, IDFC, Zee News, BASF, Mercator Lines have shown reduction in FII holding.