FIIs raise exposure in Nifty companies in Q2

Despite a tumultuous quarter, 27 firms saw a rise in FII holdings

Foreign institutional investors (FIIs), the country’s largest institutional stakeholders, continue to keep faith in India Inc.

Despite a tumultuous September quarter, when benchmark indices fell about 10 per cent and the rupee plunged as much as 16 per cent, the number of Nifty companies in which foreign investors increased exposure was more than the number of those in which they reduced holdings.

As many as 27 Nifty companies saw an increase in FII holdings during the quarter, latest BSE shareholding data show. All 50 companies, barring NTPC, Mahindra & Mahindra and Sesa Goa, have announced their shareholding patterns for the quarter.

The September quarter, especially August, saw extreme investor pessimism due to fears the US Fed’s stimulus programme would be tapered, as well as steps taken by the Reserve Bank of India (RBI) to tighten rupee liquidity. On August 21, the Sensex had fallen about 10 per cent from its highs, before closing the quarter with a decline of about two per cent.

Market experts say as the quarter was marred by extreme volatility, FIIs and other institutional investors were cautious in their approach, preferring sectors such as technology, pharmaceuticals and metals. Axis Bank, PowerGrid Corporation and HCL Technologies saw the highest rise in FII holdings —267 basis points (bps), 221 bps and 156 bps, respectively.

HCL Tech was the best-performing Nifty stock in the September quarter, as it gained 40 per cent, meanwhile, Axis Bank and PowerGird where among the worst performers, declining 24 per cent and 12 per cent, respectively. Nifty stocks that reported the most severe declines in FII holdings included Hindustan Unilever, IDFC and IndusInd Bank — 490 bps, 265 bps and 238 bps, respectively.

The sharp fall in exposure in HUL was on account of the company’s Rs 30,000-crore buyback programme, which saw some large investors tender their shares. During the September quarter, average FII shareholding of Nifty stocks declined a marginal 18 bps to 22.84 per cent, compared to June. Currently, FIIs are the single-largest institutional shareholders in the Indian market, owning about 40 per cent of the free float.

Average mutual fund (MF) and insurance companies’ hold over blue-chip stocks continued to loosen. While MF holding in Nifty companies averaged 3.3 per cent, against 3.43 per cent in June, insurance companies’ average holdings stood at 7.07 per cent as of September, compared with 7.12 per cent in the previous quarter. Insurance companies were seen increasing exposure to banking stocks; MFs preferred technology companies.

Mutual funds sold about Rs 5,000 crore of stocks, while FIIs purchased shares worth Rs 9,720 crore during the September quarter. Experts said institutional shareholders were seen increasing exposure since September, after RBI eased liquidity-tightening steps and the Fed decided to keep its bond-buying programme intact.