Banks, insurance firms cushion FII sales in Q1

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Mumbai, Aug 25: Banks, financial institutions and insurance (BFI) companies provided the much-required cushion to the equity markets in the first quarter of FY09. While foreign institutional investors (FIIs) sold a hefty $4 billion of equities in the quarter, the BFI investors together bought $2.6 billion of equities, a study by ENAM, titled “India Inc Shareholding – June 2008” shows.

The study analyses in detail the shareholding patterns and trends of the BSE-500 companies, and finds the mutual funds, including UTI, had also sold to the tune of $231 million during the quarter.

In sector-wise analysis, the study shows that FIIs sold banking and financial services stocks, and were also sellers in engineering and realty sectors, while they bought IT services stocks during the first quarter.

FIIs were underweight in sectors like oil and gas, IT and fast-moving consumer goods, while they were overweight in banking and financial services, pharma and realty.

On the other hand, the BFI sector showed quite the opposite trend to that of the FIIs. The BFI investors bought banking and financial services stocks, and also those in engineering, energy and oil and gas sectors. They sold IT services stocks during the quarter. The BFI institutions were overweight in metals, auto and FMCG, and underweight in IT services, banking and oil and gas.

Mutual funds, including UTI, on the other hand were sellers in banking and financial services, mirroring similar investment sentiment in some ways as that of FIIs, and also sold oil and gas stocks. They bought IT services, telecom and engineering stocks. MFs were overweight in engineering, pharma and FMCG, and underweight on IT services, oil and gas and banking and financial services, the study shows.

The study also does a concentration analysis, which shows BSE-100 stocks account for as much as 80% plus of BFI and FII holdings and 73% of mutual fund holdings. The holding pattern analysis shows promoters hold 57% in BSE-500 stocks in Q1, while foreign investors hold 17%, BFI 6%, mutual funds 4% and individuals 9% in these companies. Of the benchmark BSE-30 companies, promoters hold 51%, foreign investors 22%, BFIs 7%, MFs 4% and individuals 9%.

Sectorwise, the FII portfolio was skewed towards banking and financial services, oil and gas and IT services, with these three sectors together accounting for about 50% of the FIIs’ portfolio. Telecommunications, metals and mining, engineering and FMCG were the next preferred sectors for FIIs in terms of their holdings.