Stocks
Domestic institutional investors are betting on a totally different set of stocks compared to FIIs

Domestic Institutional Investors (DIIs) have sold an estimated $3.5 billion worth of equities, in contrast to their foreign counterparts who have been pumping money as if there is no tomorrow. They are averse to financials while FIIs are heavily betting on exactly those

Yesterday, we had written about how FII ownership in Indian equities has reached an all-time high (http://moneylife.in/article/fii-holdings-in-indian-equities-at-an-all-time-high/31227.html ), and how the Indian stock market had reacted with respect to influx of foreign money pouring in. Equally interesting is the action of domestic institutional investors (DIIs) who remain cautious. DIIs have sold an estimated $3.5 billion worth of equities and hold only 12% of the BSE100 stocks in the third quarter, when compared to over 19% held by FIIs.
 

Interestingly, FIIs and DIIs have taken opposing stance on the same sector—banking and financial services. FIIs are bullish while DIIs are bearish.  The top 10 FII underweight list in many ways mirrors the top 10 overweights list of domestic mutual funds (DMFs). In fact, while FIIs have kept ITC, L&T, State Bank of India, Tata Steel and NTPC as underweight while the DIIs have kept these stock in the overweight category. Similarly, while FIIs are bullish on HDFC, Infosys, Axis Bank, Kotak Mahindra Bank and Sun Pharma, DIIs have kept these stocks in the underweight category, reflecting their own investment strategy.
 

FII underweight

DII overweight


DIIs have continued to be big sellers in January and February. They continue to be overweight on consumer, capital goods and energy, while remain underweight on banking and software. The top stocks bought by DIIs were NMDC, Reliance Power and Cairn India.
 

DIIs have been reducing exposure to domestic cyclicals including autos (which FIIs are bullish on). They have also been switching out of defensives and putting more money into materials.
 

On other specific stocks, FIIs have sold Cairn India while DIIs have lapped it up. Ditto for United Phosphorus.

Last year, DIIs were net sellers for nine months out of 12 while the Sensex has moved up roughly 25%. As the market moved up, they’ve been taking advantage of the situation by cashing out, probably because they are facing redemptions as new money into mutual funds and insurance companies have dried up. Some of the DII dominant-held sectors, according to Edelweiss, as of the third quarter of 2013 fiscal are: 23% in capital goods, 17.6% in consumer goods (down from 18.1%), 11.9% in autos (down from 13%). Interestingly, DIIs have sold as much as Rs16,207.32 crore in the month of January 2013 alone, which is nearly the same amount that DIIs have sold in the third quarter of fiscal 2013 combined. On the other hand, FIIs have bought over Rs19,000 crore in January 2013 alone. FIIs have been net sellers in just two months out of 12 months last year, helped by quantitative easing of central bankers which found their way to Indian shores.
 

According to Edelweiss, of all the money that FIIs poured in the third quarter, a whopping 41% was taken up by financial sector companies, followed by the auto sector (11%). This is probably in gleeful anticipation of interest rate cuts, without realizing that the RBI is not like other central banks.

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COMMENTS

Nem Chandra Singhal

4 years ago

It seems that trading is done in a closed group. When one buys, another sells. Otherwise also, stock trading is a zero sum game.

Krishnaswami CVR

4 years ago

"DIIs have sold as much as Rs16,207.32 crore in the month of January 2013 alone, which is nearly the same amount that DIIs have sold in the third quarter of fiscal 2013 combined."- Something wrong here.. or should it read as ..." same amount FIIs have sold.."

While there may be some substance in the article, comparing Q1 F13 and comparing Q3 F13 does not make any support to the conclusion.. Or it is not clear to me?

REPLY

saravanan

In Reply to Krishnaswami CVR 4 years ago

yes, agree with CVR on Q1 vs Q3 !

prem sunderdas

4 years ago

It is wrong to say that diis and fiis have taken opposite stand. They are both part of cartel. From years when fiis buy, diis are always sellers and when fiis sell diis are always buyers. The major losers are always mutual funds (controlled by diis). Despite nifty moving up from 4500 to 6000 mutual fund investors do not get 50% returns of bank deposit rates.

REPLY

Suiketu Shah

In Reply to prem sunderdas 4 years ago

MF deserve to be losers.Their agents/wealth management companies in their greed for abnormal commission have mislead clients thruout India.Todays ET states 56% MF purchased directly and if this trend continues it wl spell doom for MF agents and deservingly so.

prem sunderdas

In Reply to Suiketu Shah 4 years ago

Yes. Besides, even the volumes in the stock market have shrunk drastically because of the greed of algo manipulation by unscrupolous operators which ensures that every intraday trader loses.Pity is that despite rampant manipilation and insider trading the regulator is a silent spectator.

saravanan

In Reply to prem sunderdas 4 years ago

True. retail investors do not understand why these two complement each other in trading. retail investor may adopt different strategy of buying what DII buy and investing in MFs of FII !

Motherson Sumi reports exemplary results; net profit up 113%

Motherson Sumi (one of our stockletter picks) has posted very good third quarter results, with We had recommended the stock on 1 June 2012 at Rs 107. The stock closed at Rs190.45 today, up by 77% in eight months

Automobile ancillary producer and flagship of the Samvardhana Motherson Group, Motherson Sumi Systems, has reported impressive 113% year-on-year (y-o-y) increase in net profit for the quarter ended December 2012, despite sluggish sales, which increased 27% y-o-y to Rs1064.53 crore. Operating profit rose 105% y-o-y for the third quarter, from Rs89.70 crore to Rs184.24 crore. The results are quite good considering that the automobile sector has been badly hit over the last few months.
 

A closer look into the Moneylife database shows that Motherson Sumi has been consistent. It has never reported a decline in net sales in the quarters since 2009, when we began analyzing this company on a quarterly basis. With an exception of December 2011, net sales grew double digits in all the quarters. Net sales grew 27% y-o-y which is less than its three-quarter y-o-y average of 30%. However, operating profit exceeded our expectations when it grew by 105% y-o-y for the December 2012 quarter, way above the 75% y-o-y average growth rate. The return on networth is high at 36%. Its valuation is reasonable, with market capitalisation quoting at over 15 times operating profit.
 

The revenue growth, on a standalone basis, was helped by 27% increase in domestic sales along with 25% increase in exports. Whereas, on a consolidated basis, exports were up by a whopping 87%, domestic sales were up just 28%. The net debt of the company stood at Rs4,308 crore while cash on the books stood at Rs759 crore.
 

The board of directors of the company in its meeting on 12 February 2013, have sought approval of the following through an extraordinary general meeting (EGM) to be held on 18 March 2013:

  1. Preferential allotment of shares to Sumitomo Wiring Systems, a promoter of the company up to 14,698,656 equity shares i.e. 2.5% of existing equity shares;
  2. Issue of shares to Qualified Institutional Buyers through Qualified Institutions Placement up to 44,095,968 equity shares i.e. 7.5% of existing equity shares.

During the quarter, there were noticeable changes to shareholding structure of one of its subsidiary companies, Samvardhana Motherson Polymers (SMPL), through which Motherson Sumi Systems holds 51% stake and Samvardhana Motherson Finance (name changed to Samvardhana Motherson International) holds 49% stake.
 

SMPL has now informed the following changes in the shareholding of the group:

  1. Shareholding in SMP Deutschland GmbH and SMP Automotive Technology Ibèrica S.L. has increased from 80% to 83.72% by acquisition from Cross Industries.
     
  2. 50% stake in Wethje Entwicklungs GmbH and Wethje Carbon Composite GmbH has been transferred to Cross Industries for consideration of acquiring aforesaid stake.

Check here for all the company analysis that we do.
 

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COMMENTS

Suiketu Shah

4 years ago

This well-reputed stock(given more than 75% returns and counting in 8 months) has been on the buy list of moneylife and DSP Meryl Lynch since quite sometime.It is no surprise with such good sound picks,moneylife is able to prove a return of more than 35% in a stagnant equity market of calendar yr 2012.

I am sure for those who follow mlife recommendations,the returns per yr in equities for next 3 yrs wl be much much more.

Insecticides India operating profit up 34% despite average sales

Insecticides India (one of our Street Beat recommendation) has posted average third quarter results, with both sales and profit trending upwards. We had recommended the stock on 18 October 2012 at Rs 412. The stock closed at Rs405 today, down 2% in four months

We had written about Insecticides India on 18 October 2012 (http://www.moneylife.in/article/insecticides-india-growing-fortunes/29149.html). The company has posted its third quarter results for the 2013 fiscal. It reported just 13% year-on-year (y-o-y) increase in net sales, from Rs105.54 crore to Rs118.83 crore. Despite sluggish sales, its operating profit was impressive as it went up 34% y-o-y to Rs10.52 crore, which showed operating efficiencies. However, its net profit dipped 3% y-o-y to Rs4.65 crore when compared to Rs4.81 crore in the corresponding period last year due to higher financing cost which nearly tripled.
 

A Moneylife analysis showed that the company hasn’t fared too badly, and in fact, matched its three-quarter averages. Net sales grew at 13% y-o-y which was close to its three-quarter y-o-y growth rate of 15%. Operating profit showed better numbers which grew at 34% y-o-y which is higher than its three-quarter y-o-y average of 33%. The return on equity is also impressive which stood at 20%—not too bad for an insecticide company. Its valuation seems fair with market capitalisation quoting at 12 times operating profit.
 

The company operates in two segments: formulations and technical. Insecticide India has more than 110 formulation products and 15 technical products and manufactures all types of insecticides, weedicides, fungicides, etc. Over 90% of the gross turnover came from the formulation segment in the December quarter.
 

An analysis into the shareholding pattern revealed that the company’s promoter holdings as well as foreign institutional investor (FII) holdings have remained unchanged. But domestic institution investors (DIIs) have lapped up the company by increasing the stake from 2.28% to 3.47% during the quarter ended December 2012.
 

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