Overseas investors have tightened their grip over India Inc with almost two out of five equity shares comprising the BSE-100 index in the hands of foreign institutional investors (FIIs) given the free float.
An analysis of shareholding pattern disclosed by the companies reveals that the share of FIIs in free-float market capitalisation of the BSE-100 companies have touched six-year high of 37.95% as on September 2012 from 35.48% at the beginning of calendar year 2012. FIIs share was around 37.43% at the end of December 2007 quarter.
These companies account for around 72% of the total BSE market capitalization, according to the data compiled by BS Research Bureau. FIIs holdings in eleven out of Nifty-fifty companies are also at record high levels.
Free float equity is that portion of the equity capital of a company that is held by non-promoters and hence available for trading by investors. It is arrived by deducting the number of shares held by the promoters from the total equity capital of the company.
Higher allocation
The rise is on account of an increase in FIIs’ stake in 71 of these 100 companies in the quarter ended September. They hike their holdings in Housing Development Finance Corporation (HDFC) and Cairn India by almost 10 percentage points each, while their stake in Cipla, Godrej Consumer Products, Tata Global Beverages have increased by 7 percentage points each in 2012.
Other than promoters, FIIs have the largest shareholders in as many as 54 companies at the end of September quarter. Their holding in 20 of the BSE 100 stocks is at over 30% and in 22 companies in the range of 20 – 30% each.
Analysts suggest that India remains an attractive market with the Sensex currently trading at a discount to its peak valuations of January 2008. The index trades at 16.97 times its 12-month trailing P/E (price earnings) far below the 27 times P/E of December 2007.
“FIIs hiking stake is positive as any liquidity driven rally benefits India the most,” said A K Prabhakar, Senior Vice President (equity research), Anand Rathi.
Strong flows
FIIs infused a net amount of Rs 94,381 crore so far in 2012, have made more than half or Rs 51,972 crore investments since July on the back of a slew of reforms initiated by the government.
“The inflow has been very robust in 2012 even when the economy was still not doing well and no major rate cut has happened to give boost the economy. The FII action clearly indicate the new Bull market is likely to set in which may take Nifty past 6300 in 2013,” said Kishor Ostwal, CMD CNI Research.
FIIs holdings in fast moving consumer goods (FMCG) giants – Hindustan Unilever and ITC, Tata Group Companies – Tata Consultancy Services (TCS), Tata Motors and Tata Power and pharmaceutical firms Cipla and Lupin are at their highest level, the data shows.
“FII exposure is highest in FMCG and healthcare which are trading at extremely high valuations leaving nothing on the table for retail investors. Any possible downgrade may shake these sectors and wipe off investors wealth,” added Ostwal.
