FII ownership of firms up at 20%

Sharp flows come amid supportive liquidity action from US Federal Reserve and other central banks to boost economy

Foreign investors’ ownership in domestically listed companies increased for a second straight quarter in June. Their shareholding had been on the decline in the preceding three quarters. Foreign institutional investor (FII) shareholding in NSE-listed companies increased to 20.09 per cent in the June quarter from 19.87 per cent at the end of the March quarter, data compiled by Prime Database show.

The increase in FII ownership comes on the back of robust investments of nearly Rs 14,700 crore in the stock markets. The value of their holdings increased nearly 10 per cent to Rs 20 lakh crore. The benchmark Nifty 50 had gained seven per cent in the three months to June.

FIIs are the biggest non-promoter shareholders in the Indian market and their investment decisions have a huge bearing on the stock prices and the overall direction of the markets.

FII ownership is expected to increase further in the ongoing September quarter as inflows continue to remain strong. So far this quarter, net investments into listed companies by FIIs have been Rs 18,500 crore ($2.7 billion). Meanwhile, the Nifty has gained four per cent since July. The sharp FII flows come amid drop in bond yields in the developed market as the US Federal Reserve and other central banks have taken steps to boost the global economy. Supportive central banks spurred prices of the so-called risky assets. Most other emerging markets (EM), too, have witnessed robust investments by foreign investors.

“FII flows into Indian equities improved sequentially in Q1FY17 as EM (emerging market) assets continued to find favour. So far, Q2FY17 FIIs inflow has been encouraging and we expect this trend to sustain, though with some volatility on the back of relative attractiveness of EM assets to DM assets, accommodative global monetary policies, long drawn and slower than expected US rate hike cycle and conductive domestic macro environment and pro-growth reforms,” said Ravi Sundar Muthukrishnan, co-head of research, ICICI Securities.

 

FIIs were seen increasing their exposure to stocks in the consumer discretionary and financial sectors (including Axis Bank, Tata Motors and Eicher Motors). Meanwhile, they were seen pruning exposure to stocks in the pharmaceutical and technology (including Sun Pharma , HCL Technologies and Dr Reddy Laboratories).

Non-banking financial companies, telecom private sector banks and materials are among the key overweight sectors for FIIs, according to ICICI Securities. Energy, capital goods, public sector banks and cement are among their underweight sectors.

In terms of value, FIIs have the highest exposure in HDFC, followed by Infosys and HDFC Bank. In percentage terms, FIIs have the highest shareholding in HDFC (76.86 per cent), followed by Bharat Financial Inclusion (63 per cent) and Indiabulls Housing Finance (58.65 per cent).