Maintaining a bullish stance on Indian equities, foreign investors increased their exposure in BSE Sensex companies to an all-time high of 27 per cent in the September quarter, says a report.
According to the Bank of America Merrill Lynch report, strong inflows from the FIIs over the last five years have resulted in all-time high foreign ownership for the Indian markets.
“FII stake in Sensex companies has been rising continuously since 2009,” the global financial services major said in a research note, adding the FII stake stood at an all-time peak of 27 per cent as of September 30.
FIIs continued to invest in India in the September quarter albeit at a slower pace. Moreover, this was the 8th consecutive quarter of positive inflows from the FIIs.
As of June 2014, FIIs collectively held around 22.5 per cent of the market and around 46 per cent of the free float.
In comparison, FIIs held around 15 per cent of total market cap and 36 per cent of free float in March 2009.
A sector-wise analysis shows that financials continue to remain the highest overweight sector for the FIIs, while software and energy are the biggest underweight sectors.
“We are positive on energy sector reforms and believe positive progress on it could lead to FII buying in PSU oil companies,” the report added.
Most bought sectors by the FIIs were: consumer, telecom, software and financials. On the other hand most sold sector by the FIIs were: industrials, cement and metals.
The global brokerage major said the consensus bullishness creates the biggest risk to markets. BofA-ML added that “the good news, however, is that domestic mutual funds have seen inflows and have been buyers post-elections after being net sellers in past few years”.
The 30-share Sensex, today slipped by 44.51 points, or 0.16 per cent, to 28,002.15 in early trade. The gauge had closed at a record high of 28,046.66 in the previous session on Friday on sustained foreign fund inflows and positive economic data.