The rupee’s steep fall against the greenback since May 22 may have unnerved foreign institutional investors (FIIs), but it has marginally revived buying from domestic institutions keen on picking up beaten-down frontline stocks.
Domestic institutional investors (DIIs) have picked up shares worth about $1 billion since May 22, a period when the rupee saw a decline of more than 14%. In contrast, DIIs had offloaded shares worth $8.6 billion between January 1 and May 22. Overseas investors, on the other hand, have been busy selling Indian shares since May 22 and have sold equities worth $2 billion. They had bought shares worth $14.5 billion between January 1 and May 22.
Brokerages are of the view that domestic players are funneling their funds into banking stocks, PSUs, capital goods and metal stocks. “A scrip like BHEL is now available at R100. These stocks can be good bets from a long-term view as, once demand revives, these companies would see their earnings improve," said AK Prabhakar, senior vice-president (research), Anand Rathi Financial Services.
"FIIs, on the other hand, have been booking profits and cutting their losses. Even stocks such as Lupin, Apollo Hospitals and ITC, which are considered stable, are seeing a sell-off.”
Life Insurance Corporation of India (LIC), among the largest domestic institutional players, has also stepped up its buying in recent months, said market observers, . “LIC has been picking up quality stocks as they are available at cheap rates,” said Nirakar Pradhan, CIO, Future Generali India Life Insurance. About 1/5 of stocks within BSE 100 are trading below their book value. A senior LIC official confirmed that the state-owned insurer has become an aggressive buyer in recent months. “Our strategy is quite simple. We buy stocks when markets are down. We have a huge holding capacity and we stay long term,” the official said on condition of anonymity.
The BSE barometer Sensex, which consists of 30 blue-chip stocks, has shed 1,816 points, or 9.76%, since May 22. The index’s current P/E based on trailing earnings is 15.44x. In the year-to-date, CNX Nifty and Sensex have been down 8.53%