Foreign portfolio investors may have turned net sellers in Indian equities since August, but their exit from the secondary market has been quite low for the whole of calendar 2015.
While the FPIs have pruned their holdings in many under performing sectors over the course of 2015, the proportion of shares held by them in the Indian stock market continues to be near record highs.
Net sales by FPIs in the secondary market since the start of 2015 amounted to $375 million. In contrast, they pumped in close to $3.39 billion in various Initial Public Offers through the year.
Since the pull out from secondary market has been negligible, FPIs still hold 19.7 per cent of the shares in the Nifty 500. This is only a tad lower than the all-time high FPI holding of 20.3 per cent, recorded in end-2014.
An analysis of the shareholding pattern of the Nifty 500 towards the end of the September 2015 shows that foreign investors have reduced exposure to sectors caught in policy logjam, and those that saw slackening sales and earnings growth due to a variety of reasons including slowing demand and the global commodity rout.
Of the 485 stocks of the Nifty 500 basket for which shareholding data for the recent September quarter are available, 292 (60 per cent) have reported a reduction in FPI stakes since the December 2014 quarter.
Out of favour
Sectors where the FPIs have pruned stakes include construction, real estate, commodities and banks. Sobha Developers, Amtek Auto, South Indian Bank, Indiabulls Real Estate, JP Associates and India Cements are some companies where FPIs shed their holdings by over 10 percentage points in the December 2014 to September 2015 period.
Among the commodity companies, Ambuja Cements, Tata Steel, Hindalco Industries, NMDC, Vedanta and GMDC saw foreign investor holding drop sharply. Oil explorers including Aban Offshore, Cairn India and Oil India too saw some exits by FPIs with crashing oil prices playing havoc on their profits and margins.
Banking stocks of both the private and public sectors had a rough time. While public sectors banks lagged in performance and disappointed investors, FPIs booked profits and pulled out of private banks after a good run. Federal Bank, Axis Bank, Bank of Baroda, J&K Bank and YES Bank are a few that saw a dip.
Swati Kulkarni, EVP and Fund Manager- Equities of UTI mutual fund, says: “We had four consecutive quarters of poor earnings growth from India Inc — the last two quarters of FY15 and the first two of FY16. Banks suffering from asset quality issues and commodity price falls both in oil and metals impacted about 40 per cent of the index constituents.” The earnings estimate for Nifty 50 companies for the full year 2015-16, which was initially about 12-15 per cent, was revised down to single digit by mid-year.
What FPIs liked
As for what the FPIs bought in, there seemed to be no particular sectoral trend. Adani Ports, Eicher Motors, Inox Leisure, Motilal Oswal Financial Services, Radico Khaitan and Lupin are some stocks in which FPIs increased holdings by more than five percentage points.
As for the New Year, most analysts feel the movement of the rupee and corporate performance hold the key to FPI flows into Indian equities.