Foreign Portfolio Investors (FPIs) have lowered their holding in BSE-200 companies to USD 291 billion during the January-March quarter and heavy selling was seen in sectors like banking and pharma, says a report.
In comparison, FPI ownership in the BSE-200 index was at USD 304 billion during the December quarter, according to the Kotak Institutional Equities report.
In percentage terms, FPI holdings in BSE-200 companies came down marginally to 24.5 per cent in the March quarter against 24.8 per cent in the preceding quarter.
A sector-wise analysis shows that heavy selling was seen by foreign portfolio investors including American Depository Receipts (ADRs) and global depository receipt (GDR) in banking, pharmaceuticals and automobiles sectors.
Meanwhile, domestic institutional investors (DIIs) increased their stakes in sectors such as banking, utilities and pharmaceuticals.
"DII holdings in BSE-200 companies increased to 11.1 per cent in the March quarter from 10.9 per cent at the end of the previous quarter," the report noted.
Sectorwise, FPIs are overweight on banking and technology sectors and underweight on consumer, industrials and energy space.
Meanwhile, mutual funds are overweight on industrials and banking sectors; underweight consumer, technology and energy.
The analysis covered mark-to-market, India equity portfolios of USD 291 billion for FPIs (including ADRs/GDRs) and USD 49 billion for mutual funds.
In the January-March quarter, the 30-share benchmark index Sensex has lost over 819 points which translates into a little over three per cent.
FPIs have sold maximum stake in Shriram Transport during the quarter under review - 9.2 percentage points followed by LIC Housing Finance (8 percentage points ).
Overseas investors also trimmed their holdings in ICICI Bank, Lupin, Tata Motors, Punjab National Bank, Jaiprakash Associates, DLF, Suzlon Energy, Cipla and India Cements.
On the other hand, Max Financial Services saw substantial sequential increase in FPI holdings - 8.4 percentage points, followed by SKS Microfinance and The Ramco Cement (4.3 percentage points each).
Going ahead, Kotak said, the Bankruptcy Code is a good
step but it will take at least a year to become fully effective as the entire ecosystem needs to be created.
"When I look at our challenges across BIFR, SARFAESI, DRTs, DRATs, and the judicial system, I hope we do better this time. Good intent needs to be backed by good people and execution. Simultaneously, the country needs to rethink the architecture of Indian banking boldly," he said.
He warned that the economy could face headwinds because of banking capacity constraints, given its dependence on 70-30 mix between public and private sector banking.
He also said that technology is changing the contours of banking while at the same time the sector has been opened up and new players will soon open shop.
"In a short time, we are likely to see 20 to 30 new banks between payment banks, small finance banks, and new on-tap banks. There will be many more new banks than before, and while this is good for capacity building, it will come with its issues.
"In India we still do not have an exit mechanism for banks. Whenever there was a problem, the policy makers chose to merge the troubled entity with another bank, in most cases a public sector bank (PSB).
"Now PSBs are no more in a position to absorb such entities easily because of the high non-performing assets (NPAs) which have put their capital under severe strain. In this context, the banking industry needs a defined framework, where easy entry is accompanied by an exit mechanism.
"The entire banking sector therefore needs to be reconfigured and re-engineered. This requires political will and consensus which is not easy," Kotak said.
He exuded confidence in growth prospects of his own bank, as also about insurance and mutual fund businesses, and said the integration of ING Vysya Bank would be completed this month.
"Another area of focus for us going forward is the area of analytics. We are gearing up the organisation for increased intelligence, speed of response and increased productivity on asset, liability, and services areas," he said.
