As the four-year bull run in the Indian market went into a sharp correction early this year, foreign investors quietly withdrew part of their holdings in leading stocks while retail investors bought into them.
Domestic investors(including institutions, MFs and retail investors)were net buyers in those top companies. These entities together bought around 1.1 percentage point stake in these companies, the highest ever in 28 quarters. During the quarter, retail investors too increased their stake by 0.4 percentage points to 14.4%, the first hike in stakes in two years.
On the other hand, FIIs continued to sell these stocks and reduce their stake for a third quarter running, taking it down by 2.6 percentage points from the September 2005 high, the report noted. Interestingly, FII stake in the top 20 holdings were up significantly to 71.3%, compared to 70% as of December 2007.
Retail investors have been buyers of these top companies’ stocks in only seven out of the past 28 quarters, since the ownership data was first disclosed, in contrast to FIIs, which have been buyers in 17 of these 28 quarters.
Apart from reducing their stakes in the 75 top companies, FIIs also continued to churn their portfolios at the individual stock level as well as at the sector level, the Morgan Stanley report said. At the sectoral level, FIIs appear to be overweight in just three sectors — telecom, financials and consumer discretionary.
Among the top 20 FII holdings, Reliance Industries, Reliance Communication and ITC were the stocks in which they had lesser holdings when compared with the levels defined in MSCI Index, one of the most accepted benchmark for global fund managers. Conversely, Bharti, ICICI Bank and SBI were the stocks in which FIIs were holding more than MSCI’s prescribed level.
While ICICI Bank, DLF and L&T reported steepest fall in ownership, HDFC, Infosys and Bharti experienced best gains.