Aditi Chandrasekhar
K.S. Badri Narayanan
Chennai, Oct. 20 The momentum in the Indian stock markets with favourable currency movements appears to be a big draw for foreign investors. Of the companies that have so far released their September shareholding pattern, every second company saw its FII stake rising. Promoters have been using the rally to cash out as one-third of the companies have seen promoters’ reducing their stake.
Of the BSE-500 companies, 255 companies have so far released shareholding data for September quarter; 136 have seen foreign investors adding to their holdings. Only six per cent or 16 companies saw promoters’ holding actually moving up. Around 76 companies have seen promoter holdings drop, while in 119 companies promoter holding remained the same. FIIs, on the other hand, also shed stake in 95 companies, which include a few Sensex companies.
Among the Sensex companies, FIIs raised their stakes in 8 companies and cut their holdings in 11 companies. However, the proportion of FIIs holding with respect to Sensex remained the same at 12 per cent.
Realty, once the fancied sector for FIIs, came back into favour with several stocks seeing higher FII holdings coming in . This was followed by banking and finance. “FII money is basically routed in through the stock market and QIPs. The latter has been seeing some very active placements, which account for the additional increase in holdings,” said brokers.
A weakening dollar is cited as one of the reasons. With the dollar weakening to new lows, investing in dollar assets may lead to lower effective returns for investors than investing in emerging markets, with their rising currencies.
“There are two major conflicting forces in the markets right now – market momentum and valuations. While the power of the momentum on the back of increasing corporate earnings works to pull in investors from abroad, current valuation trends are making them cautious,” according to Mr Saurabh Mukherjee, Head of India Equities, Noble Group.
“The rally has reached an advanced stage since March 9, and the market will continue to see a battle between these two forces. However, growth-based momentum is the stronger of the two; this will ensure consistency in FII inflow pattern,” he added.
“Promoters generally tend to raise stakes in a bear market and shed in a positively-charged bull run to take advantage of market forces. And so, promoter behaviour could serve as a meaningful indication of valuations,” said Mr Mukherjee.
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