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FIIs on stock picking spree

Despite slowing growth and weak monsoon, they have bought Indian stocks worth $1.46 billion in July so far

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Despite the adverse news flow over a weak monsoon, slowing economic growth and a high interest rate scenario, foreign institutional investors (FIIs) have invested $1.46 billion in India’s equity markets. After three consecutive months of selling, in the first 17 days of July alone, have invested around Rs 8,092 crore (as on July 17) in Indian stocks. In contrast, domestic institutional investors (DIIs) have been net sellers of Rs 3,661.54 crore in the same period.

So, what has changed, and where are FIIs investing their money? Experts believe the recent cuts in interest rates and liquidity easing measures taken by some developed countries, along with apprehension over the Chinese economy and markets, have led to fresh buying in some emerging markets, including India. Secondly, global crude oil and other commodity prices have also softened recently. And with the issue taking a backseat (under review) coupled with hopes of new reforms led by the prime minister, it has helped in improving sentiments. Also, due to a combination of both domestic and global issues, Indian equities had corrected sharply, with valuations getting closer to historic lows — at 16,000, the trades at its 10-year average of 13-14 times one-year forward earnings. This led to some value buying.

Importantly for FIIs, the rupee’s depreciation made Indian markets cheaper. “I think FIIs are finding the Indian markets attractive and, importantly, I believe this time long-term money is being deployed,” says I V Subramaniam, director & CIO, Quantum Advisors. Depreciation of the rupee has helped to a very large extent in terms of attracting foreign money. “Even if we take a 10-12 per cent depreciation against the dollar, the valuations to that extent are lower for foreign investors as compared to domestic investors. So, the depreciating rupee has made valuations even more attractive,” says Harendra Kumar, head, institutional equities and global research, at Elara Securities.


 
This led to a sudden gush of money in the markets, which could also be seen from the fund managers’ survey. It finds global emerging market investors reduced their ‘underweight’ stance on India in July to 15 per cent from 35 per cent in June (indicating a reduction in bearish views, which usually leads to an increase in fund allocations).
   

WINNERS & LAGGARDS STOCKS IN DEMAND
Sector 17-Jul % chg* Company 17-Jul % chg*
Healthcare 7,046 2.35 Den Networks 120.40 24.96
Bankex 12,135 1.90 Chola Inv 213.10 24.26
Cons durables 6,295 1.39 Shriram City 747.15 18.60
Realty 1,676 0.52 CMC 994.65 17.38
Oil & gas 8,003 -0.90 Nitin Fire  56.35 17.15
FMCG 4,939 -1.06 REI Agro 10.88 16.99
Capital goods 9,873 -1.52 Blue Star 189.70 15.64
Nifty 5,193 -1.63 United Spirits 788.05 14.91
Sensex 17,105 -1.86 KSK Energy  59.35 13.05
Power 1,925 -3.15 Infotech Ent 179.50 12.86
Metal 10,414 -3.45 *Change over June 29                                    Source: BSE
Top gainers from BSE-500 index having market capitalisation more than Rs 1,000 crore
Auto 9,126 -3.51
IT 5,209 -9.64
*Change over June 29                            Source: BSE
Data complied by BS Research

Also, Asia-Pacific investors have cut their ‘underweight’ stance on India to less than five per cent in July from about 10 per cent a month before.

However, FIIs are not lapping up everything. While data pertaining to this month shows sectors such as healthcare, bankex, consumer durables and realty have done well, while big ones like information technology, automobiles, metals and power have significantly lagged broader indices, experts believe FIIs are sector-agnostic and have been looking for individual stock stories. A look at the bulk deal data of July shows companies such as Den Networks, Blue Star, Gujarat Pipavav Port and OnMobile Global have attracted FIIs’ attention.

In Den Networks, TIAA-CREF (Teachers Insurance and Annuity Association - College Retirement Equities Fund) Investment Management LLC has bought 1.3 million shares or one per cent stake via market purchase. This US-based fund had raised its holding in the cable distribution company to aboutsix6 per cent in a deal estimated to be about Rs 15 crore. Saif India IV FII Holdings has bought an additional 2.5 million shares, representing 2.78 per cent stake in Blue Star for total consideration of Rs 47.50 crore, raising its stake in the air-conditioning company to 4.17 per cent via a bulk deal. Franklin Templeton Investment Fund has acquired 6.07 million shares of Gujarat Pipavav Port for Rs 34 crore.

While these are examples of mid-cap and small-cap stocks, FIIs have also reportedly bought shares of larger companies such as ITC in the fast moving consumer goods sector and Lupin, Cipla and Glenmark in pharmaceuticals.

In the June quarter, FIIs had raised their holdings in Titan Industries, Tata Global Beverages and Bajaj Electricals between three and six percentage points. In Hindustan Unilever, ITC, Lupin, Ranbaxy Laboratories, Whirlpool India and GlaxoSmithKline Consumer Healthcare, they have raised their stakes up to two percentage points so far in 2012.

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FIIs on stock picking spree

Despite slowing growth and weak monsoon, they have bought Indian stocks worth $1.46 billion in July so far

Despite the adverse news flow over a weak monsoon, slowing economic growth and a high interest rate scenario, foreign institutional investors (FIIs) have invested $1.46 billion in India’s equity markets. After three consecutive months of selling, in the first 17 days of July alone, FIIs have invested around Rs 8,092 crore (as on July 17) in Indian stocks. In contrast, domestic institutional investors (DIIs) have been net sellers of Rs 3,661.54 crore in the same period.

Despite the adverse news flow over a weak monsoon, slowing economic growth and a high interest rate scenario, foreign institutional investors (FIIs) have invested $1.46 billion in India’s equity markets. After three consecutive months of selling, in the first 17 days of July alone, FIIs have invested around Rs 8,092 crore (as on July 17) in Indian stocks. In contrast, domestic institutional investors (DIIs) have been net sellers of Rs 3,661.54 crore in the same period.

So, what has changed, and where are FIIs investing their money? Experts believe the recent cuts in interest rates and liquidity easing measures taken by some developed countries, along with apprehension over the Chinese economy and markets, have led to fresh buying in some emerging markets, including India. Secondly, global crude oil and other commodity prices have also softened recently. And with the GAAR issue taking a backseat (under review) coupled with hopes of new reforms led by the prime minister, it has helped in improving sentiments. Also, due to a combination of both domestic and global issues, Indian equities had corrected sharply, with valuations getting closer to historic lows — at 16,000, the Sensex trades at its 10-year average of 13-14 times one-year forward earnings. This led to some value buying.

Importantly for FIIs, the rupee’s depreciation made Indian markets cheaper. “I think FIIs are finding the Indian markets attractive and, importantly, I believe this time long-term money is being deployed,” says I V Subramaniam, director & CIO, Quantum Advisors. Depreciation of the rupee has helped to a very large extent in terms of attracting foreign money. “Even if we take a 10-12 per cent depreciation against the dollar, the valuations to that extent are lower for foreign investors as compared to domestic investors. So, the depreciating rupee has made valuations even more attractive,” says Harendra Kumar, head, institutional equities and global research, at Elara Securities.

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This led to a sudden gush of money in the markets, which could also be seen from the Bank of America-Merrill Lynch fund managers’ survey. It finds global emerging market investors reduced their ‘underweight’ stance on India in July to 15 per cent from 35 per cent in June (indicating a reduction in bearish views, which usually leads to an increase in fund allocations).
   

WINNERS & LAGGARDS STOCKS IN DEMAND
Sector 17-Jul % chg* Company 17-Jul % chg*
Healthcare 7,046 2.35 Den Networks 120.40 24.96
Bankex 12,135 1.90 Chola Inv 213.10 24.26
Cons durables 6,295 1.39 Shriram City 747.15 18.60
Realty 1,676 0.52 CMC 994.65 17.38
Oil & gas 8,003 -0.90 Nitin Fire  56.35 17.15
FMCG 4,939 -1.06 REI Agro 10.88 16.99
Capital goods 9,873 -1.52 Blue Star 189.70 15.64
Nifty 5,193 -1.63 United Spirits 788.05 14.91
Sensex 17,105 -1.86 KSK Energy  59.35 13.05
Power 1,925 -3.15 Infotech Ent 179.50 12.86
Metal 10,414 -3.45 *Change over June 29                                    Source: BSE
Top gainers from BSE-500 index having market capitalisation more than Rs 1,000 crore
Auto 9,126 -3.51
IT 5,209 -9.64
*Change over June 29                            Source: BSE
Data complied by BS Research

Also, Asia-Pacific investors have cut their ‘underweight’ stance on India to less than five per cent in July from about 10 per cent a month before.

However, FIIs are not lapping up everything. While data pertaining to this month shows sectors such as healthcare, bankex, consumer durables and realty have done well, while big ones like information technology, automobiles, metals and power have significantly lagged broader indices, experts believe FIIs are sector-agnostic and have been looking for individual stock stories. A look at the bulk deal data of July shows companies such as Den Networks, Blue Star, Gujarat Pipavav Port and OnMobile Global have attracted FIIs’ attention.

In Den Networks, TIAA-CREF (Teachers Insurance and Annuity Association - College Retirement Equities Fund) Investment Management LLC has bought 1.3 million shares or one per cent stake via market purchase. This US-based fund had raised its holding in the cable distribution company to aboutsix6 per cent in a deal estimated to be about Rs 15 crore. Saif India IV FII Holdings has bought an additional 2.5 million shares, representing 2.78 per cent stake in Blue Star for total consideration of Rs 47.50 crore, raising its stake in the air-conditioning company to 4.17 per cent via a bulk deal. Franklin Templeton Investment Fund has acquired 6.07 million shares of Gujarat Pipavav Port for Rs 34 crore.

While these are examples of mid-cap and small-cap stocks, FIIs have also reportedly bought shares of larger companies such as ITC in the fast moving consumer goods sector and Lupin, Cipla and Glenmark in pharmaceuticals.

In the June quarter, FIIs had raised their holdings in Titan Industries, Tata Global Beverages and Bajaj Electricals between three and six percentage points. In Hindustan Unilever, ITC, Lupin, Ranbaxy Laboratories, Whirlpool India and GlaxoSmithKline Consumer Healthcare, they have raised their stakes up to two percentage points so far in 2012.

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