While TATA converges, sharp variance in COAL and HNDL holdings continue:: JPmorgan

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While TATA converges, sharp
variance in COAL and HNDL holdings continue


• FII buying of COAL continues, but no sell down of other metal holdings
seen to fund COAL: FII holding of COAL has increased to 6.1% as of March-
11 up from 5.5% in Dec-10 and 3.3% in Sept-10. DII holding of COAL has
broadly remained constant at 1.7%. As of March-11, institutional holding of
COAL has increased to 78%. However, the funding of COAL (at CMP value of
FII holding would be $3.2bn) seems to be new allocation and there has been no
sharp sell down seen in other Indian mining equities.

• FII holding of TATA picks up post recent issue, continues to decline in
JSW, sharpest increase seen in HNDL in contrast to DII which continues to
see a decline: After declining through the year, FII holding in TATA increased
sharply post the recent issue (holding increasing to 20%), while in JSW it
continues to decline with holding falling to 24.5% from peak levels of 31.9% in
March-10. FII holding in HNDL continues to increase and touched 39.3% as of
March-11, while DII holding in HNDL continues to decline (falling to 13%
from 14.64% in Dec-10). FII/DII multiple in HNDL has increased to 3.03x in
March-11 compared to 1.7x in March-10. STLT, a big under-performer of
2010, saw broadly flat FII holdings while DII holdings continue to inch up in
STLT.
• Sharp increase in JSP (NR) DII ownership: DII ownership in JSPL
increased to 6.1% in March-11 from 2.3% in Dec-10 (data shows insurance
companies)
• DII v/s FII: While TATA converges, sharp variance in COAL and HNDL
holdings: As we had highlighted in our inaugural issue of FII/DII ownership,
there was relative under-ownership of TATA by the FII’s relative to JSTL and
HNDL. This seems to have corrected somewhat with FII ownership of TATA
increasing post the recent equity issuance. The seemingly large divergence
between FII and DII is now most visible in COAL and HNDL. In both the
stocks FIIs continue to increase holding levels, while DII levels continue to
come down in HNDL and remain steady in COAL. HNDL stock price
momentum has stalled given aluminum cost increase and delays in projects, but
COAL stock price momentum continues post coal price increase. We believe
both these stocks with high levels of FII ownership imply high expectation
levels in terms of execution/earnings over the course of the year.