FIIs double holdings in top 500 firms

The foreign institutional investors (FIIs), who nearly doubled their stake from 12 per cent to 22 per cent in the top 500 Indian companies (which constitute 90 percent of the market on the Bombay Stock Exchange), have been the major force in the domestic stock markets in the last five years, according to a study by Citigroup.

However, Indian promoters (including government), with over 54 per cent stake, continue to be the biggest stakeholder in the companies.

But, the role of domestic mutual funds, insurance companies and other local institutions in the stock markets remains limited. Domestic mutual funds own just 4.3 per cent in the top 500 companies, while the insurance/other institutions hold only 5.5 per cent, the study says. The public own 10 per cent stake in the companies.

The FII holdings in the 30 Sensex companies is nearly 27 per cent, second only to promoters/government, which control 49.2 per cent stake.

The study reveals that the FIIs are over weight (bullish) on telecoms, industrials, financials and materials and under weight (bearish) on energy and IT services. It further observes that while the bullish sentiments in the industrial and the financial sectors have consistently come down in the last one year, telecom sector remains high on the FIIs' list.

The negative sentiment in energy sector has not only sustained over the past year, but has also risen further in the last two quarters.

Though the bearish view on the IT sector seems widely prevalent among FIIs as well as domestic funds, the FIIs have cut down on the negative outlook in the last quarter, indicating, perhaps, a revival for the sector. Like the FIIs, the domestic mutual funds are bullish on industrials, with consumer discretionary and materials being the next most-favoured sectors.

The funds have been under weight on energy for the last 4 quarters, while their negative view on IT services has been pared down a bit in the last quarter," said Ratnesh Kumar, Citigroup's head of research in India.

Companies, which have seen the biggest rise in FII holdings are GVK Power (from 7.9 per cent in December 06 to 60.8 per cent in June 07), Elder Pharma (11.4 per cent to 37 per cent), Phoenix Mills (from nil to 22.6 per cent), Ganesh Housing (15 per cent to 36.5 per cent), Provogue (8.5 per cent to 25.3 per cent), Tele Data (1.5 per cent to 17.5 per cent), Aftek (3.8 per cent to 18.8 per cent) and Max India (25.8 per cent to 39.7 per cent).