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Promoters, public, FIIs and MFs are the major equity stakeholders in a listed corporate
entity. Of the stakeholders, FIIs have been major investors in Indian corporates, as is
evident from the accompanying chart (Exhibit 1), with their holding in BSE 500
companies moving up from 11.2% in September 2008 to 13.4% in September 2010.
The optimism displayed by FIIs in the Indian corporate growth story arises from the
fact that the Indian economy remained relatively insulated from the global economic
meltdown mostly on account of the strong domestic consumption, thrust on
infrastructure development and strong banking system. The resilience of the Indian
economy reaffirmed the faith of FII investors who have increased their holding in
Indian companies. After pulling out | 53052 crore in CY08 during the global economic
meltdown, FIIs have invested | 85368 crore in CY09 and | 130167 crore in CY10 till
date. The BSE 500 index has exhibited a positive correlation with the FII holding
(Exhibit 2) while the role of other stakeholders has been insignificant.
We have analysed the investment pattern of the stakeholders and calculated the
allocation (percentage) of their equity investment portfolio in various business
segments. We have reviewed the sectoral allocation made by these players over the
last nine quarters to gauge their sectoral preferences. Banking, metals and
construction have emerged as favourite sectors on the radar of various stakeholders.
FII equity investments
Our analysis of the FIIs equity investment portfolio reveals that banking has been able to
maintain its top allocation though the quantum has come down from 13.4% in
September 2008 to 10.9% in September 2010 after the global meltdown in the second
half of CY08. FIIs have shown faith in the Indian consumption and infrastructure story as
the FMCG, construction and infrastructure sector have seen a higher allocation during
the period. The exposure to highly regulated sectors has been gradually reduced as can
be seen from lower allocation for telecom, power and oil & gas. Though the metal sector
has got the second highest allocation, September 2010 has seen a 15% QoQ reduction
in allocation to 9.1% from 10.7%. The auto, IT and pharma sectors have been most
stable in terms of allocation whereas real estate, after the initial euphoria, has seen
significantly lower allocation.
MF equity investments
Contrary to FIIs, MFs were unable to have a significant impact on the market owing
to liquidity concerns relating to limited inflows and redemption pressure. MF
holdings in BSE 500 companies have remained within a narrow range of 3.5-3.8%
for the last nine quarters.
Banking, metals, construction and infrastructure have the highest allocation in the
mutual fund portfolio. Significant allocation has been made in regulated sectors like
power and oil & gas. Allocations of auto, IT and pharma have remained stable while
allocation for FMCG has nearly halved over the period. Exposure to the real estate
sector is limited to less than 1% of the portfolio.
Public equity investments
The Indian public investment pattern has been in line with institutional investors like
FII and MFs with regard to major portfolio allocation being distributed between
banking, metals and construction and infrastructure. Regulated sectors like oil & gas
and power have significant allocation. Telecom, which earlier had higher allocation
in the range of 7-8%, has moderated to 6%. Among major sectors, real estate has
got minimum allocation.
The top three sectors, namely banks, metals and construction and infrastructure
account for more than 25% of the allocation.
Promoter’s equity investments
Regulated sectors like power and oil & gas, along with metals have seen higher
allocation from promoters owing to the capital intensive long gestation projects.
These three sectors constitute around 40% of the promoter’s portfolio allocation.
The telecom sector has seen investment allocation in the range of 7-9% over the
period under review. Allocation to the construction and infrastructure sector has
seen a pick-up in the last four quarters with an increase from 4% to 6.8% in
September 2010.
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