FIIs prune index stocks exposure

Foreign institutional investors (FIIs) pruned their holdings in the Sensex and the Nifty stocks in the quarter ended March 2007.

The data on shareholding pattern culled from the BSE and the NSE websites showed the FIIs had invested in 42 of the 53 index stocks during the period, with their holdings in 27 stocks declining between 1 per cent and 4 per cent.

The FIIs sold in those index-based stocks where they saw no further appreciation, said equity analysts. The BSE data showed they were offloading cement, automobile and capital goods scrips.

The cement sector may witness a saturation in profits in the current year, as cement companies cannot raise prices, with imports becoming duty-free after the government scrapped 16 per cent countervailing duty and 4 per cent additional customs duty on Portland cement.

The automobile sector is facing a slowdown in demand as a result of the rise in interest rates in the past six month.

Analysts expect the demand for cars and commercial vehicles to decline considerably in the near future. With a drop in the order books of infrastructure, capital goods and engineering companies, analysts see a squeeze in their profits in the near future.

The FII holdings in eight stocks "" ACC, Gujarat Ambuja Cement, Dr Reddy's Laboratories, Ranbaxy Laboratories, Siemens, Tata Motors, Maruti Udyog and IPCL "" declined more than 2 per cent each during the quarter.

The FIIs cut their investment in Infosys Technologies, Mahindra and Mahindra, Reliance Energy, Zee Entertainment and BHEL between 1 and 2 per cent.

Their stake in heavyweight stocks such as Hindustan Lever (0.60 per cent), Reliance Industries (0.44 per cent), ONGC (0.44 per cent) and Bharti Airtel (0.15 per cent) declined less than 1 per cent.

The FII stake in two cement majors, ACC and Gujarat Ambuja Cement, dropped more than 2 per cent each, with their share in ACC declining by 4.16 per cent to 20.12 per cent (24.28 per cent) and their stake in Gujarat Ambuja Cement dropping by 2.31 per cent to 32 per cent (34.31 per cent) during the quarter.

The slowdown in the automobile sector led the FIIs to reduce their holdings in the auto majors between 2 per cent and 3 per cent. Their holdings in Tata Motors fell below 20 per cent for the first time in the last three years.

However, FII investment in Hero Honda Motors increased by 1.74 per cent to 27.76 per cent (26.02 per cent), in MTNL, the FIIs increased their exposure by 1.33 per cent to 8.50 per cent (7.17 per cent).