1. FIIs bank on financials to take advantage of 2014 rally

FIIs bank on financials to take advantage of 2014 rally

In 2014 alone, the net FII flow stood at $16 bn compared to an average net flow of close to $20 bn in previous two years

By: | Published: January 14, 2015 12:13 AM

In a year when the Indian benchmark indices touched record highs, foreign institutional investors increased their exposure to companies in the banking and financial sector. As expectations of an economic revival increased, foreign investors seem to have taken a shine to the sector considered to be a leading beneficiary of growth expansion.

Data compiled by FE shows FIIs increased their stake in as many as 20 stocks from the space in the one-year ending December 2014. For purposes of compilation we considered companies in the BSE 500 universe that have announced their shareholding details as of December 2014.

Through 2014, while the benchmark Sensex and Nifty clocked in close to 30% gains, the sectoral indices on banking , including that on the public sector banks (PSBs) recorded more than 60% gains.

Minting-GainsIn 2014 alone, the net FII flow (now referred to as foreign portfolio investments or FPIs) stood at $16 billion versus an average net flow of nearly $20 billion in the previous two years.

In the financial services space, housing finance companies and other NBFCs saw the greatest interest from foreign investors with their ownership in LIC Housing Finance, HDFC and Muthoot Finance having risen anywhere between 3.5 to 5.2 percentage points (ppt). The latest FII holdings in these companies now stands at 40.87%, 78.49% and 13.07%, respectively.

While an impending turnaround in the interest rate cycle is seen a key beneficiary for the sector, housing finance companies have emerged on investors’ radar as cost of funds for these set of NBFCs are expected to fall faster than lending rates. Analysts expect robust margin expansion for the segment going forward amidst strong mortgage growth. PTC India Financial Services, L&T Finance Holdings, JSW Holding and Bajaj Finance were the other NBFCs which witnessed substantial increase in FII ownership in the last one year.

The Street’s general preference for the private sector banks was also visible in the pattern of change in FII exposure . Foreign investors raised their holdings in Kotak Mahindra Bank, DCB Bank, ICICI Bank, each by more than 3%. The latest data for Axis Bank and Yes Bank is not yet available.

State Bank of India and Bank of Baroda were the prominent PSBs in which FII ownership went up by 2% and 3% respectively during the period while their stakes in Syndicate Bank, Canara Bank as well as Union Bank also witnessed some improvement. Notwithstanding the return in share price  towards the second half of the year, the lower valuations of PSBs seem to have attracted FII interest.

Meanwhile, foreign investors trimmed their ownership in private sector banks like ING Vysya and Federal Bank and PSBs like Bank of India and Andhra Bank. The NBFC behemoth IDFC also witnessed a decline of close to 3.7% in FII stake during the year.

  1. H
    Harry Potter
    Feb 11, 2015 at 2:35 pm
    At L&T, the top-bres (schizophrenic Egyptian Mummies) have displa geriatric trait of biting more than they can chew and digest. Dear Investors/Analysts - Watch Out! L&T top-bres were on selling spree, leading the pack Chairman Mr Naik sold his L&T shares (Rs 1200 apiece) worth 70 crores in 20 days - March 2014. Post Q1-2014 results L&T plunged by 8 %, biggest intraday decline since July 2009. Hydrocarbon subsidiary suffered losses of 900 crores, sans stake at Dhamra Port (2500 crores) L&T would have posted losses. Modi /Market euphoria saved L&T going below Rs 1300 during q2, a striking closed range of 1200 of March 2014. Part stakes at L&T Inra sold to Canadian FII - (2000 crores), expecting VGF (Viability Gap Funding) of 3000 crores Hyderabad Metro project. Stake or post losses, Deep Sea or devil? Post Q2 results L&T share plummeted from high of 1673 to low of 1450 (17 Dec, 2014). Post Q3 results another big intra-day fall of 7.44 % and no wonder a 52 week low of 900 by Feb end? Can any power on face of earth and in skies save LnT from plunging to Five Year Low of 600, post Q4 results??
    Reply

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