Compared to weightages in MSCI index, FIIs continued their underweight stance in Hindustan Lever (HLL), Reliance Industries (RIL) and ONGC. FIIs had biggest underweight positions in the December 2004 quarter.
Among the top 20 holdings, Bharti Tele Ventures (BTL) and State Bank of India (SBI) continued to remain the favourite of FIIs. FIIs holding in BTL rose by 70 basis points to 2.7% in December 2004 quarter, compared to 2% in September 2004 quarter. While portfolio size in SBI increased by 40 basis points to 3.3% from 2.9%.
In terms of net flows, NTPC, TCS, BTL, ONGC and Infosys Technologies topped the list whereas Tata Motors, Glaxosmithkline Pharma, MTNL, i-Flex Solutions and Cipla were at the bottom. However, FII stake in top 50 companies by market capitalisation rose by 1.1% to 21.1% in December 2004 quarter, as against 20% in September 2004 quarter. FIIs were the only net buyers of Indian equities during the quarter ended December 2004 and finished 2004 as the most significant buyers of Indian equities - ahead of controlling stakeholders. Domestic investors, including institutions, mutual funds and retail, sold stock during the year as well as during the quarter ended December 2004 in Indias top 50 stocks.
During the quarter ended December 2004, the implied FII inflow into stocks outside the top 50 by market capitalisation was $1.1 billion or 28% of the total FII inflow, compared to 5% in the previous quarter.
The total FII buying for the quarter ended December 2004 hit an all-time high of $3.9 billion, exceeding the previous high of $3.6 billion in the quarter ended December 2003.
Large-scale buying of mid-caps stock has raised worries among brokerages as overall foreign institutional investors (FIIs) portfolio risk has increased. According to a leading foreign brokerage report, if the market continues to correct in the coming weeks the FII portfolio faces high risk as mid-cap trading volumes are known to shrink faster than large caps in a falling market, thus making exit strategies difficult to execute.
The top 50 stocks accounted for $2.8 billion or 72% of the net buying by FIIs in the quarter (including the flow from the NTPC IPO). FIIs continue to occupy the position of the second largest investors in the country after controlling stakeholders.