Foreign institutional investors (FIIs) have pulled out more than Rs 12,000 crore from Indian capital markets so far in the month of September
The S&P BSE Sensex has seen a sharp fall of nearly 2,000 points, or little over 5 percent, so far in the month of September, but the bigger carnage was seen in individual stocks, especially the ones where foreign portfolio investors have a double-digit stake, data showed.
Foreign institutional investors (FIIs) have pulled out more than Rs 12,000 crore from Indian capital markets so far in the month of September. FIIs were net buyers in the past two months.
Rising crude oil prices, depreciating rupee, US Fed rate hike, and to a certain extent lower-than-expected GST collections are some of the factors which are weighing on sentiment.
As many as 47 stocks in which foreign portfolio investors have a double-digit stake tanked 20-50 percent in September. The list includes Dewan Housing Finance, Jaiprakash Associates, Adani Enterprises, Yes Bank, HDIL, Reliance Capital, Unitech, Indiabulls Real Estate, Radico Khaitan, Bank of Baroda, and Shankara Building Products.
“Stretched valuations triggered a corrective rally in the benchmark indices. Meanwhile, correction in individual stocks and broader market is more steep and painful as we have seen almost 50 percent of the market-cap erode in several scrips,” Soumen Chatterjee, Head of Research, Guiness Securities told Moneycontrol.
“Stocks which have a significant shareholding of foreign portfolio investors are certainly subject to higher outflows risk as we may see further unwinding from FIIs due to macro headwinds (weak rupee & rising crude prices) in the near term,” he said.
Chatterjee further added that some of the quality frontline names, largely held by FIIs, have also corrected almost 15-20% from their peaks. They may not see steep fall from here on, but may consolidate down-move or see a time correction. The may even soon find a place in the buying list of Domestic Institutional investors (DIIs).
The falling tide led to a correction in most stocks in which FIIs hold 50-70% stake, according to data collated from AceEquity. As many as six companies in which FIIs hold over 50 percent stake dropped 5-25% in September.
FIIs hold over 70 percent stake in HDFC, which fell by 8 percent, whereas Bharat Financial Inclusion, in which foreign investors hold over 50 percent stake, slipped by 9 percent in September.
Indian market notched record highs last month and expectations were high that Sensex is on track to hit 40K and Nifty would touch 12K soon. However, the recent rally was quickly overturned as fears of rising crude oil prices, falling rupee, concerns over trade war, the resignation of auditors, and concerns over stretched valuations fuelled bearish sentiment.
Experts feel that there are more reasons at play which resulted in fall in India market and not just FIIs running away. Market do look strained and weak rupee certainly means a hit on the portfolio of foreign institutions.
“With nothing being way out of the ordinary on Indian macro front, this does look like a corrective course of action from the FIIs. Having winners and losers more sector-specific, with certain sectors being spared from the fall is a testimony of the fact that sheer foreign ownership may not be the only factor for any further fall,” Shubham Agarwal, CEO & Head of Research at Quantsapp Private Limited told Moneycontrol.
"Weak Rupee is a worry for FIIs as it directly hits the portfolio of foreign investors. However, strengthening US Dollar across many major currencies indicates that this recent withdrawal by FIIs has more global routes than domestic," he said.
On the other hand, there are many stocks which bucked the trend. As many as 9 companies where FIIs hold double-digit stake rose 11-36 percent in September which include small & midcap stocks like Starcom Information, Praj Industries, Hathway Cable, Biocon, Rajesh Exports, Ponni Sugars, Five Core Exim, Uniphos Enterprises etc. among others.