India Strategy
Identifying Over-Owned/
Under-Owned Stocks
FII portfolio: O/W on cement and U/W on energy rise; U/W
on pharma and O/W on financials fall
FIIs had a tepid interest in the Indian markets during the quarter with a
negative bias. They sold cyclicals like financials, industrials and energy while
buying defensives like consumers and pharma apart from cements.
The buying in cement and pharma brought down the U/W for pharma and
increased the O/W in cement. Change in the MSCI index resulted in no
change in FII O/W on consumers despite heavy buying during the quarter.
Financials continue to be the biggest O/W sector for the FIIs with 2 stocks in
the top-5 O/W stocks list of the FIIs. However, due to the recent selling done
by the FIIs and index changes O/W on the sector is now at the lowest.
Key stocks bought: TCS, HDFC, HDFC Bank, Cairn India, & ITC.
Key stocks sold: Axis Bank, Infosys, RIL, L&T and Yes Bank.
Domestic MF portfolio: O/W on Industrials and U/W on
Financials rise; O/W on Pharma and U/W on Metals fall
Domestic MF portfolio is in stark contrast with that of FIIs, with Industrials
being major O/W sector, sector where FIIs are marginally U/W. Consumer is
another sector where domestic MFs are heavily O/W in contrast to FIIs who
are not. They are also U/W Financials where FIIs are O/W. However, on the
similar lines of FIIs, domestic MFs are also U/W commodities.
In contrast to FIIs, domestic MFs bought financials & industrials and sold
consumers & pharma. However, on the similar lines to FIIs they sold energy.
LIC net buyer
LIC was a net buyer during the quarter. LIC bought Utilities (NTPC), Software
(Infosys & TCS), Energy (RIL & Cairn India) and Auto (Bajaj Auto & Hero
Motocorp). LIC sold Consumer (HUL & ITC).
25% public holding norm to be implemented by next year
As per SEBI norms all private sector listed companies need to have 25% public
holdings by June 2013 (for PSUs it is August 2013). In the BSE 500 there are 66
companies which need to lower their promoter holding to 75%. Therefore at the
current price these companies together need to raise ~22bn US$ to sell the extra
promoter holding. Large portion of this is from the PSUs (~19bn US$). Among the
PSU which need to lower the Govt. stake include Coal India, MMTC, NTPC, &
NMDC. Private companies include Wipro, DLF, R-Power, Adani Ent.