FII ownership in 75 biggest companies at all-time high: Morgan Stanley

Of the top 20 stocks owned by institutions overall, HDFC was the most bought stock in the December quarter, while Infosys was the most sold scrip.

Foreign institutional investor’s ownership in the 75 biggest companies by market-capitalisation (m-cap) rose to a record 22.7 per cent in the fourth quarter of calendar year 2012 (Q42012), notes a recent Morgan Stanley report by Sheela Rathi, Ridham Desai and Utkarsh Khandelwal.

Their stake in the broad market (1,200 stocks listed on NSE) also touched an all-time high of 20.4 per cent during this period, the report adds.

The liquidity and reform driven rally in 2012 saw FIIs pump in a over $24 billion (Rs 1,28,359 crore) in India. This was their second highest investment in India since 1992, with only 2010 witnessing a staggering $29 billion (Rs 133,048.6 crore) since they set foot on Indian shores, data suggests.

Sectoral allocation

“During Q42012, FIIs bought in five out of the ten top sectors. Consumer discretionary turned out to be the sector with the most buying mostly due to the decline in the sector’s weight. FIIs also added a bit in materials and industrials while trimming financials, energy and technology,” notes the Morgan Stanley report.

Over the past 12 months, the consumer discretionary space has seen the most buying, while energy and technology has seen most selling, the report states.

“These are among India's largest companies. Regarding allocation, we remain sanguine about overall flows and also think flows may increase into cyclicals relative to defensives,” Ridham Desai, Strategist and Head of India Equity Research, Morgan Stanley told Business Standard’s.

Domestic institutions (DIs), on the other hand, added positions in six sectors during the December 2012 quarter with most positions added in the consumer discretionary, while they reduced the most in financials – a continuation from the previous quarters.

“Over the past 12 months, DIs have added most to technology and reduced the most in financials – something that has accentuated over the past two quarters. With this, the financials’ under-weight position is at its lowest since March 2008, whereas consumer staples remains the biggest over-weight,” the report states.

All institutions put together added positions to consumer discretionary and materials during the recently concluded quarter, which was funded by selling in financials and energy.

Stock strategy

Stakes of financial institutions (FIs) and domestic mutual funds (DMF) fell by 15 basis points (bps) and 14 bps, respectively, whle promoters reduced their stake to the lowest level in 11-years, the findings suggest.

Of the top 20 stocks owned by institutions overall, HDFC saw the most buying and Infosys was most sold (for the third quarter in a row) in the December quarter. Their largest over-weight is ICICI Bank and the largest under-weight is Reliance Industries (RIL) – unchanged from the previous quarter.