FIIs shy off banks, infra firms

A year after sub-prime crisis, foreign investors sell $4-bn stocks across sectors.

With equity market returns dwindling, foreign institutional investors (FIIs) have offloaded stocks worth $4 billion across various sectors in the last one year.

The first anniversary of the outbreak of the sub-prime crisis (August 21) has just passed and there has been a significant change in the shareholding pattern of FIIs in various sectors, according to an Enam report.

The FII shareholding in banks and financial institutions has dropped by almost 3 per cent to 33.4 per cent since September 2007.

Experts said the negative stance in this sector is mainly due to high interest rates that have squeezed the margins of banks.

Besides, banks are facing increased delinquencies from customers, resulting in higher non-performing assets (NPAs).

Similarly, FIIs’ stake in infrastructure, one of the hottest themes in 2007, has seen an erosion of 4 per cent to 16.5 per cent.

IT service companies, which were languishing last year due to the rupee appreciation, have once again caught the fancy of FIIs and they have increased stakes in these companies from 25.5 per cent to 28 per cent.

They have also scaled up their shareholding in textile companies from 20 per cent to 25 per cent.

Cement is another sector where FIIs have been cutting exposure. Their stake in cement companies has slipped from 22.5 per cent to 19.6 per cent. Although telecom stocks witnessed a bull run, FIIs’ exposure to telecom stocks has slipped marginally from 17.7 per cent to 17.1 per cent.

“We are positive on telecom as there is a very good momentum in terms of customer addition. There are top 4 to 5 companies, which have achieved business of scale. However, it remains to be seen as to how many people will bid for 3G,” said Prateek Agarwal, head (equities), Bharti Axa Mutual Fund.

According to the Enam report, the selling pattern of FIIs is in stark contrast to that of insurance companies, which are offloading IT stocks.

One of the reasons for FIIs selling bank and financial institution stocks heavily is that almost 50 per cent of their portfolio comprised of banks and financial companies before the sub-prime crisis hit the market.