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Foreign investors have the most legroom in the oil and gas sector for further investments, and the least in cement companies.
Oil and gas companies have a market capitalisation of $159.01 billion, out of which a $31.91 billion or 20.01 per cent headroom remains for foreign investment. Other sectors with relatively higher room for foreign investment include technology, metals and mining and pharmaceuticals. They have between 10 and 20 per cent headroom, according to data from Bank of America Merrill Lynch.
Foreign institutional investors or FIIs (now called foreign portfolio investors-FPIs) can buy additional shares worth $2.13 billion in cement companies, or 6.2 per cent of their total $34.48 billion market capitalisation.
“The heavy buying by the FIIs in select sectors with earnings visibility has led to FII limits getting exhausted in many stocks over the past few quarters. Some of key sectors, which have been consistently bought by FIIs are pharma, private sector banks, consumers and IT (information technology). In many of the stocks in these sectors, FIIs have exhausted the FII limits and are currently in the RBI’s restricted list for the FIIs,” said the India Equity Strategy report dated August 26 and authored by Research Analysts Jyotivardhan Jaipuria and Anand Kumar.
Among stocks which recently looked to increase their FII/FPI limit are Just Dial, and HDFC Bank.
There still remains plenty of headroom for absorbing flows, especially if foreign investors decide to switch out of current favourites or if there are fresh issuances, according to the analyst duo.
Interest rates in India are likely to mean that companies will continue to look to foreign capital for companies to repair their balance sheets, according to analysts.
Foreign inflows, which have been to the tune of Rs 73,791 crore so far in 2014, will need to continue being robust, noted an August 27 JP Morgan India Equity Strategy report authored by Bharat Iyer, Bijay Kumar and Adrian Mowat.
They are also the largest ownership group among the Sensex companies, beating even the promoters. Foreign investors hold 26.7 per cent of Sensex companies as of the end of the June quarter, noted a Citi India Equity strategy report dated August 12, authored by Aditya Narain and Jitender Tokas.
The risk for any reversal does not seem imminent, at least for the time being. “FIIs are continuing to buy. They are not worried about the short-term for now,” said Siddharth Bhamre, head of derivatives at Angel Broking.
