Ownership Data for 3Q10: FIIs Up the Ante on India: Morgan Stanley

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Ownership Data for 3Q10: FIIs Up the Ante on India
Summary of Shareholding Changes for the QE September 2010:
 FII ownership for the sample (of 75 companies) rose to a three-year
high of 20.3% (up 110bps QoQ), but still below the crest of Sep-05 at
22.1%. FII ownership for the broad market (1200 NSE listed
companies) ascended to its highest level since Sep-08 – at 18.2%.
 Concurrently, controlling stakeholders continued to reduce their stake
for the seventh successive quarter, and their shareholding touched a
six-year low of 52.4% (down 0.6% QoQ)…



 …interestingly, since quarter-ended Jun-09, FIIs have raised their
stake (in our sample) by 3.7ppt, whereas controlling stakeholders
have reduced their stake by 4.9ppt during the period.
 The Indian public, who have been buyers of Indian equities for three
quarters running, turned sellers of stocks. They reduced their stake
(by 30 bps QoQ) to 14.6%. This decline in public ownership was
mirrored in the broad market.
 Likewise, domestic institutions turned sellers of stocks (stake down
38 bps QoQ) for the first time in 12 quarters.
 Among the top 20 holdings for total institutions, Reliance Industries
and Infosys are the stocks with the biggest underweight positions.
Conversely, SBI, and Bharti are the biggest overweight positions.
 The stocks that topped the fall in ownership over the past quarter
from among the top 20 holdings were Infosys and Reliance
Industries. The stocks experiencing the biggest rise in ownership
among the top 20 holdings were ICICI Bank and SBI.
 At current market levels, we estimate the value of FII holdings in
India at US$ 316bn.
Key Sector Positions of Institutional Investors vs. MSCI Sector
Weights:
 Institutions appear most overweight on Telecoms, Financials,
Staples and Industrials, whereas they are most underweight on
Technology, Energy and Materials.
 Institutions, on aggregate, bought Telecoms (for the first time in five
quarters), Energy (for fourth quarter in a row), Financials, Materials
(after selling for three quarters running) and Utilities, and sold
Industrials, Consumer Discretionary (for the fourth consecutive
quarter), Staples, Technology and Healthcare (all in that order).
 Domestic institutions appear overweight in seven out of ten sectors.
The three largest overweight positions are Consumer Staples,
Industrials and Utilities, whereas the biggest underweight sectors
are Technology and Financials.
 For domestic institutions (including insurance companies and mutual
funds), the largest selling was in Financials, with a 117bps increase
in its underweight position, followed by Industrials, for which the
overweight position decreased by 67bp. Their major buys were
Telecoms and Technology (first instance since Jun-09).
 FIIs appear to be overweight in three of the ten MSCI sectors, with
Financials in the lead position, followed by Telecoms, and the
biggest underweight positions are in Energy, Utilities and Materials.
 For FIIs, the major buying was in Financials (for the third straight
quarter) and Telecoms (buying for the first time since Mar-09),
largely funded by selling Technology and Consumer Discretionary.