Eye on India Following - Goddess Lakshmi ::Macquarie Research,

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Eye on India
Following Goddess Lakshmi
Event
 As India gears up to welcome Goddess Lakshmi (Goddess of Wealth), we
look at the flow of Financial Institutional Investors (FII) money into Indian
companies.
 FIIs have pulled out US$650m on QoQ basis and their holdings in Indian
stocks have eroded by 15bps. FIIs have turned defensive and have moved
money out of Financials, Materials, Industrials, and IT and moved into
consumer discretionary, staples, utilities, healthcare, energy and telecom.
 Since Dec-10, FIIs have sold more large caps as their holding has seen a
120bps decline, but they retained mid caps where the aggregate holding is
down just 20bps. The top-5 large-cap gainers during Jun-Sep were M&M,
DRRD, HMCL, ACC and BPCL; while the top-5 losers were AXIS, HNDL,
Tata Steel, SBI and JSP.
Wish you a very happy and prosperous Diwali. Next issue of "Eye on
India" will be on 4th Nov.
What caught our eye?
 Which way to go? Markets are looking for direction and speculation is
abundant ahead of the Euro-Zone Summit (Oct 23) and the G-20 meeting
(Nov 4). As of 20 Oct, global markets were down WoW, with the MSCI World
and EM indices down 1.6% and 3%, respectively; India was broadly flat at
+0.3% on the Sensex and -0.1% on the MSCI India. Banks (+1.7%) was the
best performing sector while capital goods (-2.3%) was the worst. FII net
inflows were +US$153m while MFs net sold US$84m. Our top-10 list was flat
this week but continues to outperform MSCI India by 720bps since Aug-10.
 World Bank and Moody’s say growth slowing; FM finally agrees: The FM
admitted that the govt. is concerned about missing growth and fiscal
consolidation targets as crude prices, domestic inflation and interest rates
continue to remain high (Link). While Moody’s said growth is ‘slowing sharply’
(Link), WB pegged the growth trend at 7-8% pa for the next two years (Link).
 Govt. says, wait another day to tap own gas resources: The Oil Ministry
postponed the shale gas exploration policy to next year as it has hit a
roadblock due to environmental concerns and land acquisition (Link).
 Food inflation pushes up again: Weekly data showed food inflation rising
130bps to 10.6% on high vegetable prices (Link). RBI continues to be hawkish
but has been giving mixed signals of late; watch out for the Oct 25 meeting.
 On a lighter note, F1 and Metallica debut next week: Among the top-10
most watched sports (Link) and the band in Rolling Stone’s ‘100 greatest
Artists of All time’ (Link) finally come to India! Sounds fast and rocking!
Outlook
 Cracker of a week ahead, but don't get cracked: Next week is shortened
due to Diwali but will likely pack a punch. Expect high volatility driven by
gyrations in Europe, results in India and RBI policy meet. Companies posting
good results are starting to Outperform. Two of our top 10 stocks JSP and Infy
reported good results and have started to outperform. Watch out for results!