BSE 200 scorecard: From IGL to Zee, reading the tea leaves from FPI move

Krishna Kant and Ram Prasad Sahu track the investments made by foreign portfolio investors in BSE 200 companies - a move that is seen as pivotal to the future of a stock on bourses

Investments by foreign portfolio investors (FPIs) have been crucial to the performance of companies on the stock exchanges. Stock prices usually rally when FPIs increase their stake, and they fall when they sell off and reduce their exposure. At the macro level, foreign inflows into Indian equity have been volatile in recent quarters.

The changes in FPIs’ stake in BSE 200 companies suggest that FPIs have been net buyers in the last year but turned net sellers in the last two quarters.

The FPI stake in BSE 200 stocks has increased from 20.66 per cent on average at the end of December 2022 to 21.63 per cent at the end of December 2023, but it is down from a recent high of 21.9 per cent at the end of June 2023.

However, many stocks have seen a much sharper rise and fall in FPIs’ stake in recent quarters.

Here are five stocks from the BSE 200 index that have seen the sharpest rise and fall in FPIs’ stake in the 2023-24 (FY24) October-December quarter sequentially. This is likely to significantly impact the performance of these companies on the bourses.

POLYCAB

 

• --- Given Polycab’s leadership position in the industry and consistent capacity addition, the favourable demand momentum from the infrastructure and power sector would enable the company to continue posting healthy double-digit volume growth
• --- The performance of fast-moving electrical goods, which has been under pressure, is expected to improve after channel restructuring
• --- The monetisation of its extra high voltage business by 2025-26 will unlock further growth levers for the company, making it a complete cables and wires company, says Religare Research
• --- While most brokerages are positive on Polycab, and the stock has partially recovered from the sharp fall after the tax raids, the ongoing investigation will remain an overhang. After the raids, reports suggest some foreign investors have also sold their holdings in the counter

ALKEM LABORATORIES

• --- A moderation in raw material costs and the restructuring of the US generics portfolio helped Alkem to report better margins in the second quarter of FY24 and raise its margin guidance by 50 basis points for FY24
• --- Growth in the domestic market over the past year was a combination of price increases and new products
• --- The company, with a cash pile of about Rs 3,000 crore, is eyeing inorganic opportunities in the domestic market, especially in the chronic portfolio/consumer healthcare segment.
• --- Motilal Oswal Research expects a healthy 28 per cent earnings growth over 2022-23 through 2024-25 on the back of 11 per cent annual growth in US generics and 10 per cent growth in domestic formulations. It also expects a 350 basis points margin expansion during this period

BIOCON

 

• --- There was a reduction in Biocon’s earnings estimate by up to 7 per cent after the July-September quarter of FY24 due to challenges in the active pharmaceutical ingredient (API) segment of the generics business and slower offtake of the inflammation treatment drug Adalimumab
• --- The company is planning to spin off its non-core units to pare down debt. This could help bring down its net debt to operating profit to three times by 2025-26 compared to six times by 2022-23 levels
• --- In addition to deleveraging, an increase in the market share of biosimilars after the successful integration of the Viatris business and pick up in the generic API segment, driven by complex launches, are key triggers, says Sharekhan Research
• --- While there is healthy traction in the formulation segment, Motilal Oswal Research highlights that API is facing challenges in the generics segment, and Syngene has reduced its outlook for the second half of FY24

VEDANT FASHIONS

 

• --- After a muted first half given the slowdown in discretionary demand, the festival season/weddings in the second half of FY24 are expected to provide the needed fillip
• --- Although earnings estimates were revised down by 5 per cent on weak consumption trends after second-quarter results, Motilal Oswal Research expects a 13 per cent growth in revenues and profits on the back of steady footprint addition
• --- While same-store sales growth in the October-December quarter is expected to be 2 per cent, an uptick in sales and marketing spending could lead to a 300 basis point hit on operating profit margins, says Nuvama Research
• --- Despite a weaker trajectory witnessed in the past few quarters, the stock is trading at rich valuations of 57.7 times price-to-earnings estimates and 36.8 times its enterprise value-to-operating profit on 2024-25 estimates

ZEE ENTERTAINMENT

• --- There could be a sharp derating of the price-to-earnings valuation multiple due to the merger (with Sony) being called off, as Zee may not have any potential to scale up its over-the-top offering in a highly fragmented market. A few leading brokerages, including CLSA, downgraded it on Monday
• --- Zee5 has seen its losses widen due to upfront fixed costs and has been unable to reverse its losses yet. With a focus on profitability, growth can potentially suffer, says Emkay Research
• --- Any further write-offs on the inventory side or matters about related party creditors or not honouring the sports contract with Disney would be an overhang, says Elara Capital
• --- The competitive environment could get tougher given consolidation and the creation of mega players such as Reliance Industries and Disney

UNION BANK OF INDIA

 

• --- Union Bank of India has been one of the top-performing public sector banks, and its share price is up nearly 80 per cent in the past 12 months
• --- The rally has been driven by fresh investments by foreign portfolio investors (FPIs), who have more than doubled their stake in the lender to 4.11 per cent at the end of December 2023 from 1.59 per cent at the end of June 2023
• --- FPIs have been attracted by Union Bank’s strong earnings growth. The bank’s net profit was up 60 per cent year-on-year in the third quarter of FY24, which was better than most of its banking peers
• --- Brokerages remain upbeat on the stock with eight ‘buy’ recommendations against one ‘sell’ call

NMDC

 

• --- The public sector iron ore miner, NMDC, has seen a sharp rally in the past six months, and its share price has doubled since June last year
• --- The rally has been fueled by a rise in iron ore prices in the international market, which has prompted foreign portfolio investors (FPIs) to make fresh investments in the stock
• --- FPIs’ stake in NMDC has risen to 10.36 per cent at the end of December 2023 from 8.81 per cent at the end of September 2023 and 7.1 per cent at the end of December 2022
• --- According to Bloomberg consensus estimates, there is a 12.9 per cent downside in NMDC over the next year despite 17 ‘buy’ calls against three ‘sell’ calls by brokerages currently

INDRAPRASTHA GAS

 

• --- The public sector gas utility, Indraprastha Gas (IGL), has been a laggard, and its share price is up by just 5 per cent in the last year against an 18 per cent rise in the S&P BSE Sensex
• --- IGL’s poor showing has been driven by a selloff by foreign portfolio investors (FPIs) and its relatively poor financial performance in recent quarters
• --- FPIs’ stake in IGL declined to 18.22 per cent at the end of December 2023 from 22.22 per cent at the end of September 2023 and 21.3 per cent at the end of December 2022.
• --- The company’s net sales were down 2.7 per cent year-on-year (Y-o-Y) in the second quarter of FY24, while its net profit was up 28.5 per cent Y-o-Y in the period
• --- Brokerages see a 4 per cent upside in the stock over the next year with 26 ‘buy’ recommendations against four ‘sell’ calls

PETRONET LNG

 

• --- The liquefied natural gas (LNG) importer and processor, Petronet LNG, has also been a laggard with an 8 per cent rise in its share price in the past 12 months
• --- There has been a steady decline in foreign portfolio investor (FPI) stake in the company from 35.4 per cent at the end of December 2022 to 27.4 per cent at the end of December 2023
• --- The selloff by FPIs has been triggered by Petronet’s poor financial performance. Its net sales were down 21.6 per cent year-on-year (Y-o-Y) in the second quarter of 2022-23, while net profits were up 9.9 per cent Y-o-Y
• --- Brokerages see a 6.3 per cent downside in the stock over the next year with 12 ‘buy’ recommendations against 23 ‘sell’ or ‘hold’ calls

ACC

 

• --- Adani Group-owned cement maker ACC has been a laggard, and its share price has been range-bound in the past year
• --- The poor showing is attributed to a selloff by foreign portfolio investors (FPIs), and as a result, their stake in ACC has nearly halved in the last year from 12.54 per cent at the end of December 2022 to 6.87 per cent at the end of December 2023
• --- The selloff by FPIs has been triggered by ACC’s muted earnings growth in recent quarters. Its cement realisations were down 4 per cent year-on-year in the second quarter of FY24, and volume growth was lower than expected. Its net profit has remained range-bound in the past three years
• --- Brokerages see a 2.7 per cent downside in the stock over the next year despite 31 ‘buy’ recommendations against four ‘sell’ calls