Most cos with high FII stake underperform market

The Bombay Stock Exchange (BSE) Sensitive Index, or Sensex, may have registered some impressive gains in the past few weeks. But the same cannot be said for most of the companies in which foreign institutional investors (FIIs) have a stake of over 10 per cent.

As of December 31 last year, FIIs owned more than 10 per cent of the stock in 339 companies. Of these, as many as 231 – over 68 per cent – have not moved with the Sensex. In fact, since March 9, these 231 managed a gain of only 11.75 per cent compared with the 23.13 per cent rise in the Sensex

Interestingly, the remaining 108 stocks managed a far better return of 33 per cent. Still, their number is less than one-third of the total 339 high FII-stake companies. Of the 231 underperformers, 37 gave negative returns, while 70 recorded single-digit gains. The remaining 124 stocks gave an average return of 15.8 per cent in the period under review.

The significance of these 339 stocks in which FIIs have a stake of more than 10 per cent is that they account for 52 per cent of the total market capitalisation of actively traded stocks on the BSE.

In terms of FIIs’ total share in the country, these 339 companies form 10.4 per cent of their portfolio, with the 108 outperformers accounting for 5 per cent and the remaining 231 underperforming stocks 5.4 per cent.

As far as the companies that form the benchmark indices are concerned, FIIs have similarly high stakes in 28 Sensex and S&P CNX Nifty stocks.

Of these, only 12 stocks recorded a gain of over 23 per cent, while the remaining 16 appreciated in the range of 6-22 per cent.

Reliance Industries, HDFC, ICICI Bank, Punjab National Bank, Axis Bank and Kotak Mahindra Bank were among the major contributors to the additional market wealth created for FIIs, who own over 15 per cent in these stocks.
 

NOT GOOD ENOUGH
	Market price in Rs		%chg	FIIs*
	9-Mar	27-Mar
GAINERS
Aban Offshore	231.70	421.15	81.77	10.85
Deccan Chronicle	26.10	45.00	72.41	17.38
Welspun Gujarat	49.00	80.65	64.59	15.67
Matrix Labs	88.15	141.40	60.41	16.01
Geekay Fin	45.35	72.40	59.65	30.05
LOSERS
Amtek Auto	84.25	75.05	-10.92	46.88
Piramal Healthcare	192.25	175.00	-8.97	24.21
Anant Raj Ind	42.75	40.45	-5.38	24.56
Lakshmi Energy & Foods	99.55	94.60	-4.97	37.58
Godrej Consumer	124.95	120.35	-3.68	18.46
* FIIs holding in per cent as on December 31, 2008

However, among the scrips forming the Sensex, Ambuja Cement, Cipla and Bharti Airtel gained less than 10 per cent. Among the notable frontline stocks in the A group, GSK Pharma, Piramal Healthcare, Godrej Consumer Products and Marico declined by 3-11 per cent in the last twelve trading sessions.

Of the 231underperforming stocks, 92 are currently trading at a price multiple (P/E) of less than 10 times their trailing twelve-month earnings, as compared to being traded at over 30 times earlier.

The fall in the equity markets was caused by a decline in net profit growth due to the slowdown in the global economy. Most of the mid- and small-cap stocks from this category have underperformed the markets. The BSE mid-cap index gained by 13 per cent and its small-cap index by 15 per cent as against an over 23 per cent rise in the Sensex in the period under review.