Foreign institutional investors (FIIs) pumped money into high-risk sectors, such as public-sector banks, real estate and telecommunications, to add beta to their portfolio in the quarter ended June 2014, shows a finding of top 500 companies by Credit Suisse.
That said, FII stake in the BSE 500 universe remained high during the April-June quarter, despite a marginal decline from an all-time high of 19.8% in Q4FY14 to 19.6% in June 14, mostly due to the market outpacing FII holdings. In all, foreign funds pumped $5.8 billion into equities during the quarter.
Despite the outperformance of high-risk sectors, FIIs hold an underweight stance in many of these sectors, most notably in state-owned banks, utilities, industrials and metals.
In contrast, the government’s stake rose to 16% from 14.2%, owing to strong performance of state-owned companies on hopes of an economic recovery under the new government. PSU shares gained 35% sequentially, Credit Suisse stated in its report.
Given the $5.8 billion of FII buying in Q1FY15, combined with the rising market (a total market cap at $1.4 trillion), FIIs now own $279 billion, up from $234 billion in the previous quarter. In comparison, the DII ownership rose to $150 billion to levels seen three years ago. While DIIs’ relevance seems to have stablised in terms of their share in the institutional pie, Credit Suisse expects their share to pick up as domestic mutual funds see a rise in AUMs