An analysis of the change in shareholding pattern of foreign institutional investors (FIIs) over the last six months suggests that they have been bearish on the banking and metal sectors. They preferred to bet on pharmaceutical and automobile companies.
According to shareholding data disclosed by 57 companies that are part of the BSE 100 index,FIIs have pared their holdings in the banking and the metal stocks significantly over the last six months. Of the top 11 stocks that witnessed the maximum stake reduction by FIIs in the last two quarters (July-December 2011),six were from the banking sector. While the FII stake in Axis bank has dropped from 35.45 per cent in the quarter ended June 2011 to 31.38 per cent in December 2011 and that in State Bank of India has gone down from 10.88 per cent to 7.88 per cent in the same period.
Three among the remaining five are metal companies including Tata Steel. The FII stake in Tata Steel has slipped the most in absolute terms from 17.06 per cent in June 2011 to 12.87 per cent at the end of December 2011.
Experts said FIIs are uncomfortable with the current outlook of the banking and the metals sector. FIIs are genuinely concerned about bad loan levels of banks. A series of 13 repo rate hikes by the Reserve Bank of India has put pressure on companies,especially entrepreneurs,leading to non-recovery and default. Also banks have been deferring their non-performing assets by reconstructing loans. Analysts with FIIs are concerned about the NPA risk, said Ashvin Parekh,national leader,global financial services,Ernst & Young.
As far as mining and metal stocks are concerned,experts said there were worries over supply of ores. The supplies are unlikely to stabilize any time soon and this has been putting pressure on the stocks of such companies,experts said.
On the other hand,several pharmaceutical companies Glenmark Pharma,Lupin,Dr Reddys Laboratories,GSL Pharma have witnessed a stake hike by FIIs. The FII stake in Glenmark Pharma has gone up from 31.19 per cent in the quarter ended June 2011 to 34.2 per cent in the quarter ended December 2011.
In the quarter ended December 2011,the FIIs investment pattern was more balanced as their net holdings increased in 31 companies and dropped in 26 companies. L&T witnessed the maximum stake reduction (in absolute terms) from 15.84 per cent in September 2011 to 13.84 in December 2011. It was followed by Tata Steel where the FIIs pared their holdings by 1.74 percentage points during the last quarter to 12.87 per cent.
LIC Housing Finance and Tata Motors were the biggest gainers in terms of FII interest. While the FII holding in LIC housing Finance jumped from 37.8 per cent to 40.13 per cent during the quarter ended December 2011,it increased from 21.88 per cent to 24.14 per cent in Tata Motors in the same period.