Within the BSE 200 universe, as many as 143 or 73% companies saw an increase in FII shareholding during the December quarter. Analysis of the shareholding data indicates that FIIs aggressively increased their exposure in banking and financial services space. Several measures on fiscal and monetary policies saw FII increase their shareholding in 7 out of 10 BFSI companies.
Moreover, FIIs remained net buyers in all private-sector banks during the December quarter as a result of superior quality of asset books, higher margins and strong retail franchise resulting in higher CASA (current account savings account) ratio compared with PSU banks. Housing finance major HDFC saw the biggest sequential increase (4.45 percentage points or pps) in FII shareholding during the December quarter followed by Federal Bank (3.65 pps).
Earlier this month, Bank of America Merrill Lynch in its survey stated that overseas investors continued to remain overweight on India based on expectations the government would continue with monetary and fiscal policy reforms.
Investors are generally overweight India and added weight to Indian equity markets for the past six months, stated the survey, led by analysts Jyotivardhan Jaipuria and Anand Kumar. Incidentally, the Winter session of the Parliament was the most productive with many important bills, including retail FDI in Brand Retail Sector Bill, Companies Bill, and Banking Amendment Bill, being cleared by the policy makers.
Average FII shareholding of these 83 companies the arithmetic mean of company stakes held by foreign institutions increased 100 basis points (1 bps) during the December quarter. In addition to BFSI, other companies to have witnessed increase in FII shareholding include Mahindra & Mahindra (2.86 pps), Maruti Suzuki (2.68 pps), Tata Global Beverages (2.61 pps), Adani Enterprises (2.32 pps), and Ashok Leyland (2.14 pps), among others.
Analysts said December was one of the best months for Indian equities as the government renewed the faith of foreign institutions by pushing its agenda of reforms, encouraging many domestic and global institutions to re-rate stocks and increase their targets for Indian benchmark indices.
Interestingly, while FIIs continue to remain overweight on India, analysts warned that recent market out performance vis-a-via other emerging markets continue to pose a risk to Indian equities, given the uncertainties on current account deficits that could slow the capital inflows, if not stall them.
FII money has poured in because valuations were cheap and expectations that things would get better. We are currently trading at 14x P/E FY14e. While there may be some upgrade to that number, 14x is neither cheap nor expensive. So there are other destinations for foreign institutions to look at, says Sonam Udasi, head (research), IDBI Capital Markets. FIIs may not take my money off the table, but the pace of allocations would slow down a bit. If things improve, they would start pumping money again, he added.
Meanwhile, FIIs have net bought a little over $4 billion worth of Indian equities in January (2013) alone after pumping more than $24 billion last year.