FIIs flow robust, despite disappointing earnings season: HSBC

FIIs inflow in Indian market stood at $ 24 billion taking FII ownership to record levels in Calendar Year 2012

Foreign Institutional Investors (FIIs) continued buying into Indian markets despite the lacklustre earnings performance holding up the market.

FIIs have injected nearly $34 billion since January 2012, which led to multiple expansions, while earnings growth remained flat, HSBC Research said in its earning season analysis here.

In Calendar Year 2012, FIIs inflow in Indian market stood at $ 24 billion taking FII ownership to record levels.

The reform process initiated by the government since September 2012 has fuelled strong foreign inflows into India. Out of the largest 200 companies listed, foreign investors were net buyers of 145 companies in the quarter ending December 2012, while their ownership in nearly 50 companies was at record high levels, the report said.

It pointed out that the revenue growth of Indian corporates, however, turned out to be the worst in the last three years. Revenue growth came down from 27% year-on-year in March 2010 to 10% y-o-y in December 2012.

Sector wise, telecom, industrials, and consumer discretionary saw their earnings contract in the quarter ending December 2012, while defensives sectors such as consumer staples, IT, healthcare and utilities saw the highest earnings growth in the same period, it added.

HSBC report said that telecom, consumer discretionary, and materials were the worst performers.

Telecom sector saw the highest earnings contraction (-56% y-o-y earnings growth) mainly because of Bharti Airtel, India's largest telecom company, which posted 12th consecutive quarterly drop in net profit. Bharti's profit tumbled 72% to Rs 2.8 billion hit by high interest costs, forex fluctuation and tax provisions.