In what can be seen as a redux to the global financial crisis of 2008, the no-holds-barred selling by foreign investors at the end of the March quarter brought their ownership in 160 of the top 200 firms down by 1.5%, from where it stood at the end of December 2019.
In what can be seen as a redux to the global financial crisis of 2008, the no-holds-barred selling by foreign investors at the end of the March quarter brought their ownership in 160 of the top 200 firms down by 1.5%, from where it stood at the end of December 2019. To offset this, promoter shareholding was seen surging 1.6% in the same period. Similarly, between September 2008 and December of the same year, foreign investors shareholding dropped by 1% while promoter shareholding increased by 1.5%, said brokerage and research firm Emkay Global. The 160 of the top 200 firms analysed by Emkay account for 70% of the top 200 market capitalization.
Ownership of foreign investors stood at 21.9% at the end of December last year, by the end of March the same dropped to 20.4%. On the other hand, promoters stake in the 160 stocks analysed was at 47.8% in December and it jumped to 49.4% at the end of the last quarter. “When we compare this with the change in ownership during the last such crash in 2008 (the December 2008 quarter), we see a ~100 bps (1%) drop in the FPI ownership through the selloff. Followed by another 60 bps (0.60%) in the subsequent quarter,” the report said. With the 1.5% drop in ownership between December and March being almost similar in magnitude to the 2008 fall, Emkay said that it could be argued the selling is behind Indian equity markets. However, the report highlighted the shortfall in such an argument being the high starting point for the fall in foreign ownership — standing at 22% in comparison to 15% in 2008. Promoters have been barred by market regulator SEBI from purchasing shares between April and the end of June to prevent insider trading.
The ruthless selling by foreign investors saw Rs 1.18 lakh crore flowing away from India in the month of March alone as Foreign Portfolio Investors booked profits amidst the rising uncertainty in global markets. However, since then the FPI selling has seen a remarkable recovery with FPIs turning net-buyers in the first week of May. Majority of the selling done by foreign investors came prior to the initial lockdown that was implemented in the last week of March. However, analysts at Emkay Global are not jumping the gun. “It is difficult to conclude if FPI selling is done – it depends a lot on global risk sentiment, of course,” the report said.