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FIIs make the most of falling Rs,raise stakes in pharma,IT

Rupee has fallen more than 7%,triggering an FII sell-off totalling nearly $3 billion of shares.

While foreign institutional investors (FIIs) have slowed the pace of their buying into the Indian equity markets owing to a global risk-off sentiment,they continue to pick up stocks in export-oriented sectors pharma and IT,which are likely to gain from the weakening rupee.

According to data sourced from Capitaline,pharma entities like Sun Pharma,Lupin,Dr Reddy’s,Wockhardt,Novartis,Abbott and Pfizer,along with technology majors like Mastek,NIIT Technologies,Mindtree,Mphasis,Oracle Financial Services and HCL,all registered an increase in their respective FII holdings in the quarter ended June 30,2013.

Market experts attribute this trend to the fact that both pharma and technology stocks are being looked upon as defensives even as the overall sentiment towards equity remains bearish.

Since June,the rupee has fallen more than 7%,triggering an FII sell-off totalling nearly $3 billion worth of shares.

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“Pharmaceutical companies are safe bets when markets are seeing high volatility. The fact that Indian drugmakers received approval for 211 abbreviated new drug application (Anda) in just the first half of CY13 is also a positive trigger for the sector. Apart from this,IT giants Wipro,Infosys and TCS have all reported a pick-up in their US business,” said Alex Mathews,head (research),Geojit BNP Paribas Financial Services.

Among pharma companies,small- and mid-cap firms Astrazeneca Pharma and Strides Acrolab have seen the sharpest rise in FII holding. For Astrazeneca,as on March,the FII holding was 0.01%,while at the end of June,it raced to 15.31%. For Strides Acrolab,FII holding was 45.51% in the quarter ended March,while it grew to 51.74% by the end of June.

Within the IT sector,FIIs have done bulk of their buying in small- and mid-sized players,increasing their stake in Commex Technology and Persistent Systems. For Commex,FII holding as on March was 21.68%,while at the end of June,it was 27.16%. For Persistent Systems,the FII holding was 12.39% in the quarter ended March,while it rose to 14.84% at the end of June quarter. In the current calendar year,CNX Pharma and CNX IT have outperformed the NSE benchmark index Nifty.

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The pharma and IT index have gained more than 16% and 30%,respectively,to Nifty’s 4% decline during the same period. The average one-year forward p/e multiple for pharma sector stands at 19.56-times,while for IT,it is 15.22-times currently.

Meanwhile,other sectors that have seen a q-o-q rise in FII holdings include telecom,realty,FMCG and auto. At the same time,FIIs have reduced their stake in the banking sector,which is facing headwinds from hike in short-term lending rates and deteriorating asset quality.

“Banking stocks are seeing a correction. Foreign institutional players could be selling scrips to book profits,” added Mathews.

First published on: 03-08-2013 at 04:06:53 am
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