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Showing their preference for cyclical stocks over defensives, foreign institutional investors (FIIs) have continued to accumulate stocks from the banking, capital goods, power and auto sectors over the last 3-6 months.
A screening of constituents of various sectoral indices shows that, in the last two quarters, FIIs have accumulated shares of cyclical stocks, most of which traded at lower valuations three months ago.
The banking and capital goods sectors, which have steered the market gains since mid-February, appear to be clear favourites given that some the leading bluechip stocks witnessed an increase of 1-3% in FII holdings in the last two quarters.
In the banking space, private sector players Axis Bank, ICICI Bank and IndusInd Bank witnessed the biggest increase in FII shareholding. At the end of the March quarter in which the government offloaded its 9% stake in Axis Bank held by Specified Undertakings of UTI (SUUTI), FII ownership went up by 556 basis points to an all-time high of 48.74%.
Similarly, due to an increase of 146 bps, FII stake in ICICI Bank touched 39.85%, the highest since December 2007.
FII interest in the public sector banks, which due to their decayed financials were the most beaten-down stocks two months ago, appears to be coming around as well.
Both State Bank of India and Bank of Baroda witnessed an increase in FII holding to 9.68% and 15.62% in the latest quarter.
FII holdings in capital good blue chips have witnessed an increase of 40 to 80 bps in the March quarter, although in the last two quarters FII ownership in Larsen & Toubro Ltd, Crompton Greaves and Thermax has increased by 322 bps (to 18.47%), 277 bps (19.23%) and 132 bps (16.62%), respectively.
Meanwhile, foreign investors are trimming their stakes in defensive sector companies like IT and consumer goods.
While FIIs scaled back their ownership of both Tech Mahindra and MphasisS by over 100 bps each, they reduced their holdings for
a second consecutive quarter in FMCG companies
Hindustan Unilever, United Spirits,and Dabur by nearly 70 bps.
FII stake in Asian Paints came down by 150 bps to 17.97% during the period.