While overseas investments into domestic equities are pouring in from all directions, data shows that most of these investments are concentrated in a top few stocks.
While overseas investments into domestic equities are pouring in from all directions, data shows that most of these investments are concentrated in a top few stocks.
According to data sourced from ICICI Securities, just five stocks accounted for 34.3 per cent of foreign portfolio investors (FPI) ownership in BSE 100 companies as at the end of March 31, 2016.
They are IT bellwether Infosys and TCS and leading private sector lenders HDFC Ltd, HDFC Bank and ICICI Bank.
If one includes other companies like Reliance Industries, Kotak Mahindra Bank, Sun Pharma Industries, ITC and Axis Bank, the FPI ownership accounts for 50 per cent of the total foreign ownership in BSE-100 companies.
“These stocks are leaders in their respective sectors and it shows the enormous confidence that overseas investors have placed in these companies. It suggests that foreign investors are expecting least fluctuation in earnings growth in these companies. This also provides certain degree of comfort to retail investors,” said Ravi Sundar Muthukrishnan, co-head, strategic research, ICICI Securities.
While broadbased FPI ownership provides much needed stability to a stock, Mr Muthukrishnan, however, added that such stocks could also experience high volatility in case a large shareholder decides to book profit or reshuffle its portfolio.
In Infosys, foreign portfolio investors (FPI) ownership stood at 57.5 per cent, which is 8.8 per cent of the total foreign ownership in BSE 100 companies. Similarly, the foreign ownership in HDFC Ltd and HDFC Bank accounts for 8.1 per cent and 7.7 per cent of the total foreign shareholding in top 100 companies. “In the current quarter till date, Indian equity markets has seen a net inflow of $ 0.5 billion and we believe that this trend will not reverse meaningfully in the near term. Going by the market performance in April, we can infer that institutional investors have increased their holding in realty, metals, power and infra stocks,” he added.
According to ICICI Securities, the promoter shareholding in Nifty companies dropped 0.80 per cent to 44.4 per cent as on March 31, 2016. This was on account of the deleveraging exercises carried out by corporates by issuing fresh equity, government’s fund raising activity by cutting stake in PSU and promoter stake sale in NBFC, infrastructure, IT and utilities. While the bulk of the promoter selling over FY16 was bought by domestic institutional investors, FPI activity remained stagnant.
