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India Metals and Mining
Under/Over-owned stocks across FII/DII- Clear difference between TATA and HNDL and implications in 2011E as underlying drivers set for a change
• DII v/s FII- Clear difference in preferences between TATA and HNDL:
Over the past 4 qrtrs, while FIIs have reduced ownership of TATA, DIIs
have increased; while the opposite is the case for HNDL (FIIs have
increased through the year, while DIIs have reduced). This ties in with the
consistent divergence of feedback on these two stocks. We have found, in
general, FIIs more worried on Corus and the implied European exposure, while
less willing to take the India expansion into account and also overall less
optimistic on steel v/s non ferrous and mining. We have found DIIs more
focused on the potential benefits of the India expansion, while not expecting
any further deterioration in Europe. On HNDL, we have sensed more optimism
by FIIs more as a play on stronger aluminum prices, combined with Novelis
cash flow, while we have sensed the DIIs discomfort on valuation and aluminum
prices. In our view, the relative under-owner ship of TATA by FIIs relative
to HNDL and JSTL does provide a) downside support for TATA’s further
potential FII sell off b) continued strong TATA India earnings with Corus
stabilization could lead to re-rating for TATA and c) in the event the
aluminum financing trades comes under more pressure, HNDL would come
under pressure.
• Which stocks are at risk from possible FII sell off: In terms of FII/DII
multiple, the highest ratio is for JSPL, followed by Sesa, JSW and COAL,
while the ratio is very low for TATA and SAIL.
• The FII and DII portfolio as of Dec-10: Analyzing the holding patterns across
India’s top 11 stocks (in metals) based on average share price for the quarter and
% holdings and assuming these 11 stocks as the FII portfolio in India metals, we
find that, STLT’s share has dropped from 29% in Dec-09 to 18% in Dec-10
while HNDL has gone up from 12% to 18%. JSP (NR) and TATA both have
seen reductions (JSP from 20% to 17% and TATA from 13% to 11%). JSW and
SAIL have been broadly flat at 8% and 4% respectively. Coal India was at 13%
in Dec-10 quarter. NALCO, NMDC and HZ cumulatively accounted for 3%.
Interestingly while DII ownership between Sept to Dec qrtr did not change
for COAL, FII ownership increased from 3.3% to 5.5% (FIIs now account
for 55% of free float in COAL). Running a similar analysis on DII, TATA
share is at 29% (33% in Dec-09), followed by NMDC at 18%, while SAIL,
STLT and HNDL are in the 10-12% range. Stripping out NMDC, TATA is as
much as 36%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Metals and Mining
Under/Over-owned stocks across FII/DII- Clear difference between TATA and HNDL and implications in 2011E as underlying drivers set for a change
• DII v/s FII- Clear difference in preferences between TATA and HNDL:
Over the past 4 qrtrs, while FIIs have reduced ownership of TATA, DIIs
have increased; while the opposite is the case for HNDL (FIIs have
increased through the year, while DIIs have reduced). This ties in with the
consistent divergence of feedback on these two stocks. We have found, in
general, FIIs more worried on Corus and the implied European exposure, while
less willing to take the India expansion into account and also overall less
optimistic on steel v/s non ferrous and mining. We have found DIIs more
focused on the potential benefits of the India expansion, while not expecting
any further deterioration in Europe. On HNDL, we have sensed more optimism
by FIIs more as a play on stronger aluminum prices, combined with Novelis
cash flow, while we have sensed the DIIs discomfort on valuation and aluminum
prices. In our view, the relative under-owner ship of TATA by FIIs relative
to HNDL and JSTL does provide a) downside support for TATA’s further
potential FII sell off b) continued strong TATA India earnings with Corus
stabilization could lead to re-rating for TATA and c) in the event the
aluminum financing trades comes under more pressure, HNDL would come
under pressure.
• Which stocks are at risk from possible FII sell off: In terms of FII/DII
multiple, the highest ratio is for JSPL, followed by Sesa, JSW and COAL,
while the ratio is very low for TATA and SAIL.
• The FII and DII portfolio as of Dec-10: Analyzing the holding patterns across
India’s top 11 stocks (in metals) based on average share price for the quarter and
% holdings and assuming these 11 stocks as the FII portfolio in India metals, we
find that, STLT’s share has dropped from 29% in Dec-09 to 18% in Dec-10
while HNDL has gone up from 12% to 18%. JSP (NR) and TATA both have
seen reductions (JSP from 20% to 17% and TATA from 13% to 11%). JSW and
SAIL have been broadly flat at 8% and 4% respectively. Coal India was at 13%
in Dec-10 quarter. NALCO, NMDC and HZ cumulatively accounted for 3%.
Interestingly while DII ownership between Sept to Dec qrtr did not change
for COAL, FII ownership increased from 3.3% to 5.5% (FIIs now account
for 55% of free float in COAL). Running a similar analysis on DII, TATA
share is at 29% (33% in Dec-09), followed by NMDC at 18%, while SAIL,
STLT and HNDL are in the 10-12% range. Stripping out NMDC, TATA is as
much as 36%.
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