FIIs restructure portfolio

The last 45 days have seen heightened FII investment flows after nearly a quarter of lull and more than four quarters of gradual sell off.

The last month alone, FIIs have pumped in about $1 billion in stock markets.

These investors have restructured their portfolios to protect their interest in a volatile market, according to a study of FII investments patterns conducted by Mumbai-based, CNI Research on 394 companies listed on the stock exchanges in India.

The study covering the fourth quarter of fiscal 2009 reveals that there is a direct co-relation between FIIs hiking stake and their investment pattern with the company share performance.
Smart strategy?

“Wherever the FIIs have hiked stake, the share prices have gone up and conversely, wherever they have exited, the prices have lowered. Therefore, for an investor, this offers some broader hints at where to invest,” Mr Kishor Ostwal, Managing Director of CNI Research, said.

The Mumbai-based research company analysed 394 companies where FII stake has changed during the fourth quarter of 2008-2009.

The stake patterns of the 394 companies show that in 121 companies the FII stake has dropped below 5 per cent, in about 164 companies it is still above 5 per cent and in about 109 companies, they stepped up their holding.
Sector specific

Mr Ostwal told Business Line that the last four quarters have seen volatile markets and continuous efforts by the FIIs to restructure their portfolio. This was also compounded by tough markets back home where the FII come from.

This meant constant asset reallocation. However, for FIIs with sector specific mandate, say IT or real estate, it has been a tough way out, especially in a falling market.

“The research sought to analyse the co-relation between FII holding and stock prices. After the recent re-allocation of portfolio and heightened investment, it is time to have re-look at some of the stocks where FIIs have earlier exited due to tough market conditions due to pressure on some sectors. It won’t be long before they will come back to them,” he explained.

The study covered Maruti Suzuki, Grasim Industries, Infosys Technologies, Hero Honda, Lanco Infrastructur, HDFC, Colgate Palmolive, Tata Steel and host of others.

via BL