Fiis Pick The Best Of Infotech Companies To Scale Up Holdings

Foreign institutional investors (FIIs) expressed their confidence in select software companies such as Infosys Technologies and Satyam Computers through higher holdings, but in companies such as Himachal Futuristic (HFCL), DSQ Software and Pentamedia Graphics, their holding has steadily declined in the nine month period between April-December 2001.

"FIIs have established a clear hierarchy in the information technology (IT) sector by building up holdings in select scrips, driven by sound fundamentals and abandoning several companies in which they had built up large positions in the past," market sources said explaining the trend.

"Once the darling of the speculators and big bull Ketan Parekh, some scrips have clearly fallen out of favour with foreign fund managers, who have in any case become more choosy about investing in Indian tech firms," they added.

Vinay Maloo-promoted HFCL was the hardest hit. The stock, which soared due to equity participation by Australian media baron Kerry Packer, had in the year ending March 31, 2001, FII holdings of 27.1 per cent. FIIs' holding came down to 3.77 per cent at the end of December 31, 2001.

Similarly, FII holding in DSQ Software declined from 3.78 per cent of its equity on March 31 to 0.72 per cent on December 31, 2001. FII stake in Pentamedia Graphics slipped to 2.85 per cent by end-December 2001 from 12.97 per cent on March 31, 2001.

In contrast, Infosys and Satyam continue to attract foreign fund managers. FIIs hiked their stake in Infosys by 9.1 percentage points in the last nine months (April-December). Likewise, they have increased their stake in Satyam by 5.53 percentage points in the June-December period. FII holdings in Infosys and Satyam stood at 37.99 per cent and 38.12 per cent, respectively, at end-December 2001.

Analysts tracking the sector said the investment preferences of FIIs reflected their greater confidence about the ability of some firms to operate in a difficult market.

A Business Standard survey had recently showed infotech firms posting lowest ever sales, net profit growth due to pressure on billing rates and fewer client additions. It also showed top companies such as Infosys and Satyam were less susceptible to downturn than some of their counterparts.