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India Equity Strategy
Owning India Inc: Do Inflows Matter Less than Outflows?
Big FII inflows, small market up-moves - Oct-Dec10 recorded a massive
$11bn+ of FII inflows, raising FII ownership 40bps to over 18% (and by value to a
peak of $295bn): but this moved the market just over 1%. This is surprisingly
modest, but suggests that capital raisings (88% of FII flows in 2010) and new
listings (5% of market cap added in 2010) are increasingly absorbing in-flows, and
moderating the valuation impact on the market. But what if there are outflows?
Capital raisings might not be a concern, but Jan/Feb 11; -14% on only $1.4bn in
outflows suggests market upsides on inflows appear less than market downsides
on outflows.
Ownership trends the same, but shift to large caps — Longer-term ownership
shifts remain the same; Indian promoters and Foreigners (Portfolio + strategic)
continue to own a quarter of India’s top 500 businesses each, the Government is a
close third, while domestic investors, Retail and MFs, continue to see ownership
fall (Domestic Insurers continue to maintain 5%+ownership). There is a fairly
decisive shift to large caps, and away from small/mid caps; and the market’s 2011
move suggests this trend has possibly accelerated.
Portfolio positioning - Playing it safe — Investors have been pulling in;
portfolios have moved closer to benchmarks, outsized plays have been cut
(Financials for Foreigners, Industrials for domestics) and small /mid caps are out of
favor. There still continues to be a relatively wide divergence between FIIs and
DMFs in their portfolio positioning, but Domestic MFs and Insurance portfolios too
are dissimilar. FIIs remain most OW on Financials (much reduced though during
the quarter – performance would be a key driver) and UW on IT, DMFs remain
most OW on Industrials and sharply UW on Financials, while the Insurers are most
OW on Materials/consumers, while UW on IT/Energy. While we see all the investor
classes closer to their benchmarks, portfolio positioning remains widely divergent:
will the down-market that we are currently seeing change this?
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Equity Strategy
Owning India Inc: Do Inflows Matter Less than Outflows?
Big FII inflows, small market up-moves - Oct-Dec10 recorded a massive
$11bn+ of FII inflows, raising FII ownership 40bps to over 18% (and by value to a
peak of $295bn): but this moved the market just over 1%. This is surprisingly
modest, but suggests that capital raisings (88% of FII flows in 2010) and new
listings (5% of market cap added in 2010) are increasingly absorbing in-flows, and
moderating the valuation impact on the market. But what if there are outflows?
Capital raisings might not be a concern, but Jan/Feb 11; -14% on only $1.4bn in
outflows suggests market upsides on inflows appear less than market downsides
on outflows.
Ownership trends the same, but shift to large caps — Longer-term ownership
shifts remain the same; Indian promoters and Foreigners (Portfolio + strategic)
continue to own a quarter of India’s top 500 businesses each, the Government is a
close third, while domestic investors, Retail and MFs, continue to see ownership
fall (Domestic Insurers continue to maintain 5%+ownership). There is a fairly
decisive shift to large caps, and away from small/mid caps; and the market’s 2011
move suggests this trend has possibly accelerated.
Portfolio positioning - Playing it safe — Investors have been pulling in;
portfolios have moved closer to benchmarks, outsized plays have been cut
(Financials for Foreigners, Industrials for domestics) and small /mid caps are out of
favor. There still continues to be a relatively wide divergence between FIIs and
DMFs in their portfolio positioning, but Domestic MFs and Insurance portfolios too
are dissimilar. FIIs remain most OW on Financials (much reduced though during
the quarter – performance would be a key driver) and UW on IT, DMFs remain
most OW on Industrials and sharply UW on Financials, while the Insurers are most
OW on Materials/consumers, while UW on IT/Energy. While we see all the investor
classes closer to their benchmarks, portfolio positioning remains widely divergent:
will the down-market that we are currently seeing change this?
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