FIIs raise holding in frontline IT stocks

Foreign institutional investors (FIIs) have raised their holding in most large- and mid-cap information technology (IT) stocks.

They have increased their holding in Infosys Technologies, TCS, Wipro and HCL Technologies, according to shareholding data for the quarter ended September 30.

Their stake in mid-cap technology stocks such as MphasiS, Patni Computer Services, NIIT Technologies, Aptech and Hexaware Technologies has risen between 2 per cent and 4 per cent during the period.

Nambe Investment Holdings, Hartford Capital Appreciation Fund, Daivi Ventures, Fidelity Puritan Trust, Indea Capital Pte Ltd and WF Asia Fund were among the FIIs that invested in IT firms during the quarter.

The major reason behind the stake hike has been cheap valuations of frontline IT stocks in terms of the price to earning multiple (P/E). Though the 30-scrip benchmark Sensex is trading at a P/E of over 22.05 based on trailing 12-month earnings, the Bombay Stock Exchange (BSE) IT sector index is trading at a P/E of 21.96. Infosys Technologies is available at a P/E of 19.64 times, while TCS and Wipro are available at a P/E of 21.

The BSE IT index has outperformed the Sensex by gaining 38 per cent as compared to the 16 per cent rise in the Sensex since July 2009. Till Friday, TCS (Rs 641.15), Wipro (Rs 589), MphasiS (Rs 673.70), Polaris Software (Rs 169.10) and Oracle Financial Services (Rs 2,079.25) were trading around their two-year highs on the BSE.

FIIs increased their holding in 3i Infotech and Educomp Solutions through the qualified institutional placement (QIP) route. In 3i Infotech, FIIs’ stake increased to 16.59 per cent in September 2009 from 7.74 per cent in the June quarter. In Educomp Solutions, the hike was from 37.07 per cent to 44.05 per cent.

Swiss Finance Corporation, Mauritius, bought a 9.12 per cent stake in the company in a QIP in September as against a less than 1 per stake at the end of the June quarter.

In Educomp Solutions, Hartford Capital Appreciation Fund and Variable Insurance Products Fund, two FIIs, acquired more than 2 per cent stake each during the quarter.