Nov. 11: Indian stock markets may have put the ghost of the recession behind them, but investors are still cagey. Domestic investors have missed out on the strong gains that the equity markets have seen over the past several months — they have infact been pulling money out of markets. Meanwhile, foreign invest-ors have raised their holding in India over the past year to an all time high.
For the September quarter, FII holding in Indian markets has increased to an all time high of 15 per cent, says JP Morgan Research in a recent note. Meanwhile, domestic investors have been cutting their holdings, the brokerage adds. Another brokerage, Morgan Stanley, says that FII ownership in a sample group of 75 firms has touched a level of 20.3 per cent — the highest since 2005. Based on the current market value, the total value of FII investments in India is $316 billion. Year to date, FIIs have invested a total of $24.8 billion in India — of which $6.4 billion was invested just in October — ahead of the Coal India IPO. Meanwhile, Indian mutual funds have sold $6 billion worth of stocks so far in 2010 — of which $1.3 billion has been in the month of October.
The stake of Indian public, which had been a buyer in the earlier quarters, has seen its share fall to 14.4 per cent. Many retail investors also invest via mutual funds, so the rate at which small investors have exited the market is higher.
Domestic institutions have also turned net sellers during the last quarter — cutting their stake by another 0.38 per cent. Financial advisors warn retail inve-stors against re-entering equity markets at these levels at one go.
Financial services has been the favorite sector for foreign investors. During the September quarter, FIIs raised their stake in the financial services sector by a whopping 3.2 per cent. Energy and healthcare sectors have seen foreign investors pare holdings.
Amongst the larger firms, State Bank of India and Bharti have seen the maximum addition by foreign investors while Reliance Industries has seen them pare their exposures. Telecom sector has also seen buying by foreign investors for the first time in several quarters.