FIIs trim their holding in top Indian cos

Banks and steel cos have been most prominent ones where FIIs have significantly reduced their holdings.

With business confidence and stock market performance in the country weakening amidst high interest rates,high inflationary environment and global growth concerns,foreign institutional investors (FIIs) have reduced their holdings in key Indian firms by up to 3.5 percentage points in the quarter ended September,2011.

According to the data available at Bombay Stock Exchange (BSE) for 30 companies out of 100,FIIs have reduced their holding in every two out of three firms in the last quarter. Ten companies,however,witnessed an increase in stakeholding by FIIs.

Banks and steel companies have been the most prominent ones where FIIs have significantly reduced their holdings. While the FII holding in Axis Bank came down by 3.53 percentage points from 35.45 per cent to 31.9 per cent over the quarter ended June 2011,the holding in JSW Steel came down from 24.14 per cent to 21.51 per cent. Tata Steel and Jindal Steel also witnessed a reduction in FII holding.

Story continues below this ad

While FII stake in State Bank of India (SBI) came down from 10.88 per cent to 8.65 per cent,Bank of India,Bank of Baroda,Union Bank of India and Canara Bank also witnessed significant reduction in holdings. Experts say that the banking sector is now under pressure and hence FIIs are reducing their exposure.

While the credit growth is coming off now,NPAs are expected to rise on account of slippages in SME loans. CASA (current and saving accounts) for banks is also not growing and thus there are high cost deposits with banks which are expected to bring down the net interest margin, said Aseem Dhru,CEO,HDFC Securities. There are concerns that interest rates will remain at elevated levels for a longer period than was expected and hence FIIs are reducing their exposure to this sector, said Pankaj Pandey,head of research at ICICI direct.

The FII trend is however contrary to a move by promoters of several companies hiking stakes in their respective firms such as Bharti Airtel,Tata Motors,Tata Steel and Jindal Steel in the months of August and September,as their share prices were trading at near 52 week lows.

While there have been more cases of FIIs pulling out their stake in the last quarter,there have been few instances of stake hikes too. Glenmark and Hero MotoCorp witnessed the maximum stake hike by FIIs. While the FII holding in Glenmark went up by 1.39 percentage points from 33.67 per cent to 34.8 per cent,that in Hero MotoCorp went up by 1.13 percentage points.

Story continues below this ad

FII investment data with Sebi shows that FIIs pulled out a net of Rs 2,951 crore during the July-September quarter.